CAPITAL ONE FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2008

Summary

Capital One Financial Corporation (COF) reported a net income of $374.1 million, or $1.00 per diluted share, for the third quarter of 2008, a significant turnaround from a net loss of $81.7 million, or -$0.21 per diluted share, in the same period of the prior year. This improvement was driven by a substantial increase in the provision for loan and lease losses, which rose by $498.4 million to $1.1 billion, reflecting the weakening global economy and associated credit deterioration. Despite the challenging economic environment, Capital One's net interest income saw a healthy increase, supported by higher margins in its U.S. Card segment. However, non-interest income declined due to lower servicing and securitization income, impacted by higher expected charge-offs in the securitized portfolio. The company also announced its intention to participate in the U.S. Treasury's Capital Purchase Program, agreeing to sell $3.55 billion in preferred stock, a move taken to support financial stability and as an attractive alternative capital source.

Key Highlights

• 1Net income of $374.1 million ($1.00/share) for Q3 2008, compared to a net loss of $81.7 million (-$0.21/share) in Q3 2007.
• 2Significant increase in the provision for loan and lease losses to $1.1 billion from $595.5 million in the prior year's quarter, reflecting economic challenges.
• 3Net interest income increased by 11.2% to $1.8 billion.
• 4Non-interest income decreased by 21.1% to $1.7 billion, primarily due to lower servicing and securitization income.
• 5Capital One announced its intention to participate in the U.S. Treasury's Capital Purchase Program, with the Treasury to purchase $3.55 billion of preferred stock.
• 6Managed net charge-off rate increased to 4.30% from 2.86% in the prior year's quarter.
• 7Total assets grew to $154.8 billion from $150.6 billion at the end of the prior year.

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