Capital One 2014 Annual Report Download - page 50

• projected or expected tax benefits or assets;
• accounting matters related to the target or partner company, including accuracy of assumptions and
estimates used in preparation of financial statements such as those used to determine allowance for
loan losses, fair value of certain assets and liabilities, securities impairment and realization of deferred
tax assets; and
• our expectations regarding macroeconomic conditions, including the unemployment rate, housing prices,
the interest rate environment, the shape of the yield curve, inflation and other economic indicators; and
other financial and strategic risks associated with any merger or acquisition.
•Target Specific Risk: Assets and companies that we acquire, or companies that we enter into strategic partnerships
with, will have their own risks that are specific to a particular asset or company. These risks include, but are not
limited to, particular or specific regulatory, accounting, operational, reputational and industry risks, any of which
could have a material adverse effect on our results of operations or financial condition. Indemnification rights, if
any, may be insufficient to compensate us for any losses or damages resulting from such risks. In addition to
regulatory approvals discussed above, certain of our merger, acquisition or partnership activity may require third-
party consents in order for us to fully realize the anticipated benefits of any such transaction.
Reputational Risk And Social Factors May Impact Our Results And Damage Our Brand.
Our ability to originate and maintain accounts is highly dependent upon the perceptions of consumer and commercial
borrowers and deposit holders and other external perceptions of our business practices or our financial health. In
addition, our brand has historically been, and we expect it to continue to be, very important to us. Maintaining and
enhancing our brand will depend largely on our ability to continue to provide high-quality products and services.
Adverse perceptions regarding our reputation in the consumer, commercial and funding markets could lead to
difficulties in generating and maintaining accounts as well as in financing them. In particular, negative public
perceptions regarding our reputation could lead to decreases in the levels of deposits that consumer and commercial
customers and potential customers choose to maintain with us. In addition, negative perceptions regarding certain
industries or clients could also prompt us to cease business activities associated with those industries or clients.
Negative public opinion or damage to our brand could result from actual or alleged conduct in any number of
activities or circumstances, including lending practices, regulatory compliance, security breaches (including the use and
protection of customer information), corporate governance, and sales and marketing, and from actions taken by regulators
or other persons in response to such conduct. In addition, third parties with whom we have important relationships
may take actions over which we have limited control that could negatively impact perceptions about us.
In addition, a variety of social factors may cause changes in borrowing activity, including credit card use, payment
patterns and the rate of defaults by accountholders and borrowers domestically and internationally. These social factors
include changes in consumer confidence levels, the public’s perception regarding consumer debt, including credit
card use, and changing attitudes about the stigma of bankruptcy. If consumers develop or maintain negative attitudes
about incurring debt, or if consumption trends decline or if we fail to maintain and enhance our brand, or we incur
significant expenses in this effort, our business and financial results could be materially and negatively affected.
We Face Intense Competition In All Of Our Markets.
We operate in a highly competitive environment, and we expect competitive conditions to continue to intensify. We
face intense competition both in making loans and attracting deposits. We compete on the basis of the rates we pay on
deposits and the rates and other terms we charge on the loans we originate or purchase, as well as the quality of our
customer service and experience. Price competition for loans might result in origination of fewer loans or earning
less on our loans. We expect that competition will continue to increase with respect to most of our products. Some of
our competitors are substantially larger than we are, which may give those competitors advantages, including a
more diversified product and customer base, the ability to reach out to more customers and potential customers,
operational efficiencies, more versatile technology platforms, broad-based local distribution capabilities, lower-cost
funding and larger existing branch networks. In addition, some of our competitors, including new and emerging
28 Capital One Financial Corporation (COF)