Capital One 2012 Annual Report Download - page 68

Business Segment Expectations
Credit Card Business
As noted above, in Domestic Card, the closing of the 2012 U.S. card acquisition has impacted and will continue
to affect quarterly trends in loan growth, revenue margin and credit metrics. We anticipate that the run-off of
parts of the portfolio acquired in the 2012 U.S. card acquisition as well as anticipated run-off of in our
installment loan portfolio will more than offset the underlying growth trajectory in other parts of our Domestic
Card business resulting in a modest decline in full-year average loan balances in 2013 from average loan
balances in the fourth quarter of 2012. In addition, the sale of the Best Buy loan portfolio will result in an
incremental reduction in loans held for investment of approximately $7 billion. We expect charge-off levels to
remain relatively stable with normal seasonal patterns in 2013.
As we have disclosed in the past, we are taking actions that we believe will enhance our franchise, such as
aligning customer practices related to the 2012 U.S. card acquisition with our own, and ending the sale of
products like payment protection, which will have a modest negative impact on revenue margin. We also expect
that the run-off of higher-margin, higher-loss receivables purchased in the 2012 U.S. card acquisition will change
the mix of loans in our Domestic Card business, driving a further modest reduction of revenue margin in 2013.
We expect the sale of the Best Buy portfolio, which resulted in our transferring these loans to held for sale from
held for investment in the first quarter of 2013, and the related held-for-sale loan accounting will increase our
revenue margins until the sale of the loans. Other factors which we are unable to accurately predict will also
affect revenue margin. These factors, which include market and pricing dynamics, credit trends, and competitive
intensity, could have positive or negative impacts on the Domestic Card revenue margin.
Consumer Banking Business
In our Consumer Banking business, we expect the ING Direct acquisition to continue to have a significant impact
on Consumer Banking loan volumes as we anticipate that run-off in the acquired Home Loans portfolio will more
than offset growth in auto loans.
Commercial Banking Business
Our Commercial Banking business continues to grow loans, deposits, and revenues as we attract new customers
and deepen relationships with existing customers. Although we anticipate some quarterly fluctuations in
nonperforming loan and charge-off rates, we expect our Commercial Banking business to continue strong and
relatively steady performance trends throughout 2013.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with U.S. GAAP requires management to make a number
of judgments, estimates and assumptions that affect the reported amount of assets, liabilities, income and
expenses in the consolidated financial statements. Understanding our accounting policies and the extent to which
we use management judgment and estimates in applying these policies is integral to understanding our financial
statements. We provide a summary of our significant accounting policies in “Note 1—Summary of Significant
Accounting Policies.”
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