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Capital One Financial Corporation (NYSE:COF)

Capital One Financial Corporation (NYSE:COF). December 5, 2013 Valerie Chan, Hisham Haider Dewan Caleb Pierson, Harout Sahakian. Agenda. Introduction Company overview Macro-economic overview Industry analysis Financial analysis and projections Valuation Recommendation.

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Capital One Financial Corporation (NYSE:COF)

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  1. Capital One Financial Corporation (NYSE:COF) December 5, 2013 Valerie Chan, Hisham HaiderDewan Caleb Pierson, HaroutSahakian

  2. Agenda • Introduction • Company overview • Macro-economic overview • Industry analysis • Financial analysis and projections • Valuation • Recommendation

  3. Company Overview

  4. Introduction to Capital One Source: 2012 Capital One 10K

  5. COF Subsidiaries & Business Segments • Capital One Bank, National Association (COBNA) • Capital One, National Association (CONA) Credit Card Consumer Banking Commercial Banking Source: 2012 Capital One 10K Page 1

  6. Credit Card Source: COF 2012 10K. Pg. 71, 183.

  7. Consumer Banking Source: COF 2012 10K. Pg. 78, 184.

  8. Commercial Banking Source: COF 2012 10K. Pg. 82, 190.

  9. Assets by Segment Source: Bank of America Merrill Lynch 2013 Banking & Financial Services Conference November 12, 2013

  10. Segment Revenue Trends *in millions Source: Capital IQ

  11. Operation & Income Trends Source: Capital IQ

  12. Recent Developments Source: COF 2013 3Q 10Q. Pg. 11. http://www.bloomberg.com/news/2013-11-21/capital-one-ceo-sells-44-million-of-stock-in-november.html?cmpid=yhoo

  13. Regulation Source: COF 2012 10K. Pgs. 9-17.

  14. Macro-economic Overview

  15. U.S. Household debt

  16. Source: ycharts.com Treasury Yield Curve Source: federalreserve.gov

  17. Industry Analysis

  18. Credit Card Issuing Commercial Banking Source: 1) IBISWorld Industry Report 52221, Credit Card Issuing in the US, October 2013 2) IBISWorld Industry Report 52211, Commercial Banking in the US, August 2013

  19. Banking More Mobile and Online

  20. Competitive Position of COF

  21. COF Porter's Five Forces Analysis Source: FDIC Statistics At A Glance Sept 2013

  22. SWOT Analysis of COF

  23. Financial Analysis

  24. Return on Assets vs. Competitors

  25. Capital Ratio Source: Capital IQ

  26. Tier 1 Capital Ratio vs. Competitors Source: Bank of America Merrill Lynch 2013 Banking & Financial Services Conference, November 12, 2013

  27. Asset Quality Source: Capital IQ

  28. Loan Loss & Write-Offs

  29. Transforming Source of Funds Source: Bank of America Merrill Lynch 2013 Banking & Financial Services Conference, November 12, 2013

  30. Profitability & Margin Analysis Source: Capital IQ

  31. Technical Analysis Current price $72.35* | P/E (ttm): 10.23*| P/B 1.009* Source: Yahoo Finance http://finance.yahoo.com/q/ta?s=COF&t=1y&l=on&z=l&q=l&p=m50%2Cm200&a=&c= As of 12/4/2013

  32. COF Stock Performance vs. Competitors Source: Yahoo Finance http://finance.yahoo.com/q/ta?s=COF&t=1y&l=on&z=l&q=l&p=m50%2Cm200&a=&c= As of 12/4/2013

  33. Residual Income, Comparable Company, Benjamin Graham Valuation

  34. Residual Income Model Source: CFA Program 2013 Level 2 Volume 4 Page 373 to 386

  35. Definition of Residual Income Source: CFA Program 2013 Level 2 Volume 4 Page 373 to 386

  36. Residual Income Valuation Residual Income = (Net Income to Common Equity) – (Beginning BV of Equity) X (Cost of Equity)

  37. Residual Income Assumptions

  38. Return on Equity

  39. Monte Carlo Simulation

  40. Public Comparable Company

  41. Comparable Company Valuation

  42. Price to Book Ratio Increasing

  43. Benjamin Graham’s Formula

  44. Valuation Summary

  45. Recommendation 100 Shares of NYSE:COF @ Market Price BUY Cost: $7,235 (at Dec 4, 2013 closing price) Approximately 4.5% of portfolio

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