Capital One 2014 Annual Report Download - page 7

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growth as spending on general-purpose
credit cards grew 16%. Our credit card
business, including both domestic and
international, posted net income of $2.5
billion in 2014. Our credit card business
is in a strong position to deliver growth
with attractive and resilient returns.
Our consumer banking business, which
encompasses Capital One 360, retail
banking, auto finance, and home loans,
delivered $1.2 billion of net income in
2014. Ending loans were essentially flat
from 2013, with strong organic growth
in auto loans offset by the planned
run-off of acquired home loans.
Our consumer banking businesses are delivering solid performance in the
face of continuing industry headwinds. While our auto business remains
strong, we continue to closely monitor pricing, underwriting practices, used
vehicle prices, and other market factors. Returns on new originations are
lower than returns in the overall auto loan portfolio, but remain resilient and
above hurdle. In our retail deposit business, we continue to grow primary
banking relationships and manage costs, although we expect that the
inexorable impacts of the prolonged low interest rate environment will
continue to pressure returns even if rates rise in 2015.
The growth trajectory and profit levels in our commercial banking
business slowed somewhat in 2014. Net income for the year was
$659 million, down from $731 million in 2013. Ending loans grew
13%, compared to 16% growth in 2013. The charge-off rate for 2014
remained exceptionally low at 0.02%, although we do not expect current
charge-off levels to be sustainable. Non-performing loan balances remain
at low levels.
While our commercial banking results are strong, competition is intense,
pressuring underwriting terms, margins, and returns. It’s likely that the
pace of our commercial loan growth will be slower in 2015, but we expect
our commercial banking business will continue to deliver solid results.
Commercial and Retail Banking
We are focused on building lasting
relationships with our customers.
Our commercial bankers offer
products, services, and expertise
to help businesses succeed. And
our retail bankers continue to build
primary banking relationships with
customers by providing simple and
straightforward solutions to help
people manage their money.