8-KRegulation FD

CAPITAL ONE FINANCIAL CORP 8-K Report, Regulation FD Disclosure (May 7, 2009)

Filed May 7, 2009For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation (COF) filed an 8-K on May 7, 2009, to disclose the results of its participation in the U.S. Department of the Treasury's Supervisory Capital Assessment Program, commonly known as a "Stress Test." The report indicates that federal supervisors concluded Capital One does not need to raise additional Tier 1 capital or Tier 1 common equity under the "more adverse" stress test scenario. This assessment considered the company's estimated pre-provision net revenues, loan loss allowances, and existing capital resources for 2009 and 2010. Furthermore, the filing addresses the company's intention to repay TARP funds as soon as prudent. It also clarifies the distinction between "reported" and "managed" financial statements, particularly concerning the accounting treatment of securitized loans and the revenue recognition associated with them. For investors, the key takeaway is the stress test's conclusion that Capital One is adequately capitalized to withstand a severe economic downturn, thereby reducing immediate capital raising concerns.

Key Highlights

  • 1Capital One passed the U.S. Treasury's "Stress Test" (Supervisory Capital Assessment Program).
  • 2Supervisors concluded that Capital One does not require additional Tier 1 capital or Tier 1 common equity.
  • 3The assessment evaluated estimated credit losses and capital resources under a "more adverse" economic scenario for 2009 and 2010.
  • 4The company is working towards repaying its TARP funds received in November 2008.
  • 5The filing clarifies the difference between "reported" and "managed" financial statements, particularly regarding securitization accounting.
  • 6The results are based on GAAP financial statements and the company's own calculations for managed assets.

Frequently Asked Questions

This 8-K filing is primarily to disclose the results of Capital One's participation in the U.S. Treasury's Supervisory Capital Assessment Program (Stress Test). It informs investors that the company successfully met the capital adequacy requirements under a severe economic scenario.

No, the supervisors concluded that Capital One does not need to raise any additional Tier 1 capital or Tier 1 common equity based on the "more adverse" stress test scenario.

The "reported" financial statements follow standard GAAP, where securitized loans are removed from the balance sheet. The "managed" financial statements adjust for securitization effects, including off-balance sheet loans, to provide a more comprehensive view of earnings generated from the entire loan portfolio, which Capital One believes is useful for stakeholders.

Yes, the company stated that it continues to work towards repaying the funds received from the U.S. Treasury under the TARP Capital Purchase Program as soon as it is prudent and appropriate to do so.