1. Capital One Financial Corporation
Analysts
Anthony Sorrentino, Ryan seong, Amy Shu, Antonia wang
Presented March 28, 2017
REAL CLIENT MANAGED PORTFOLIO

2. REAL CLIENT MANAGED PORTFOLIO
Agenda
Current Holding
Company and Its Business
Macroeconomic Overview and Drivers
Industry Overview and Analysis
Financial Analysis
Competitors
Valuations
Technical Analysis
Recommendation
REAL CLIENT MANAGED PORTFOLIO

3. Current Holding Historical Transactions and Valuations
12/9/2013 – Purchase 100 $73.13
Current Price: $82.13
Return to Client
Realized Return
Dividend Income: $4.70
Return: $4.70/$73.13 = 6.43%
Unrealized Return
Price Appreciation: $82.13 / $73.13 – 1 = 12.31%
Total Return
Holding Period Return = 18.73%
Average Annual Return = 5.36%
Selected Statistics
Market Cap $39.47B
P/E
Dividend and Yield $1.60 (1.91%)
52 Week Range $58.03 – $96.92
Source: Yahoo! Finance
REAL CLIENT MANAGED PORTFOLIO

4. Company and its Business
Capital One Financial Corporation is a diversified bank. The Bank, through its subsidiaries, offers a broad spectrum of financial products and services to consumers, small businesses, and commercial clients both domestically and internationally. Capital One has bank locations in Connecticut, Louisiana, New Jersey, New York, and Texas.
In 1945, the Bank of Virginia formed. This company issuing products similar to credit cards in 1953 and was MasterCard issuer #001
In 1988, Signet hired consultants Richard Fairbank (is now chairman and CEO) and Nigel Morris to implement their “Information-Based Strategy”
In 1994, credit card business grew to 5 million customers but was at high cost. Signet spun off its credit card business as Capital One to focus on banking
In 1999, the company stepped up its marketing efforts and was rewarded with significant boosts to its non-interest incomes and customer bases
In 2005 and 2006, this company acquired Hibernia and North Fork Bancorporation, expanding into banking sector
In 2012, the company acquired HSBC’s US card portfolio
In 2012, the company acquired online bank ING Direct
In 2009, the company expanded its franchise into Washington, DC, market by buying Chevy Chase Bank
Bank of Virginia became Signet Banking through acquisitions and mergers with 30 banks and several finance and mortgage companies between 1962 and 1986
In 2001, this company acquired AmeriFee, which provides loans for elective medical and dental surgery; and PeopleFirst, Inc., the nation’s largest online provider of vehicle loans
In 2013, the company sold its Best Buy card portfolio to Citibank
In 1991, Signet lure customers with its innovative balance-transfer credit card. Second-generation products came in the following year
In 1996, the company established its savings bank to offer products and services to its cardholders
In 2011, the company boosted its credit card business with the acquisition of GE Capital’s $1.3 b Hudson’s Bay credit card portfolio, and Kohl’s $3.7 b credit card portfolio
In 2015, the company launched its Capital One Home Loans Online Neighborhood
Capital One Financial Corp.
In 2016, the company entered into a 10- year program agreement to become the exclusive issuing partner of co- branded credit cards to Cabela’s customers
Capital One Bank (USA) subsidiary
Capital One, NA subsidiary
provide its credit and debit card products, as well as lending and deposit products
provides banking products and financial services to consumers, small businesses and commercial clients
REAL CLIENT MANAGED PORTFOLIO
Source: Hoover's Inc., a Dun & Bradstreet Company
COF 10-K Mar Page 142

5. Company and its Business
Canada
International
The U. K.
Louisiana
Chairman, President & CEO: Richard D. Fairbank
Founder of Capital One
Served on the board of directors of MasterCard International and BITS Technology Forum
Served as the Chairman of MasterCard International's U.S. Region Board of Directors
Geogia
Credit Card
California
Texas
Auto Loan
Florida
Home Loan
Consumer Banking
Domestic
Illinois
Ohio
Retail Banking
New York
Multifamily real estate
Pennsylvania
Commercial Banking
CFO: Stephen Crawford since May 24, 2013
Co-funder and former Partner of Centerview Partners LLC
Spent more than 20 years in various positions at Morgan Stanley, which included serving as Co-President, CFO, Chief Administrative Officer, Chief Strategic Officer, and head of the Financial Institutions Group
Maryland
Industry
Virginia
New Jersey
Connecticut
Capital One’s loan portfolios are geographical diversified, concentrated in regions above.
In the past, the company’s strategies and actions are designed to deliver and sustain strong returns and capital generation through the acquisition and retention of franchise-enhancing customer relationships across the businesses.
At present, the company’s strategy leans in improving efficiency by growing revenues and managing costs across the company, realizing analog cost savings and other efficiency gains as it become more digital
REAL CLIENT MANAGED PORTFOLIO
Source: COF 10-K Page 18, 38
COF 10-K Page 38
Company Website

6. Company and its Business
In Millions of USD except Per Share
FY 2013
FY 2014
FY 2015
FY 2016
Last 12M
Net Revenue
22,384.0
22,290.0
23,413.0
25,501.0
+ Net Interest Income
18,106.0
17,818.0
18,834.0
20,873.0
Revenue %
74.9
74.6
75.2
75.8
76.4
+ Total Interest Income
19,898.0
19,397.0
20,459.0
22,891.0
+ Interest Income
18,323.0
17,769.0
18,884.0
21,292.0
+ Investment Income
1,575.0
1,628.0
1,599.0
- Total Interest Expense
1,792.0
1,579.0
1,625.0
2,018.0
+ Total Non-Interest Income
4,278.0
4,472.0
4,579.0
4,628.0
+ Commissions & Fees Earned
4,014.0
3,888.0
3,950.0
4,098.0
4,013.0
+ Other Operating Income (Losses)
264.0
584.0
629.0
530.0
615.0
- Provision for Loan Losses
3,453.0
3,541.0
4,536.0
6,459.0
Net Revenue after Provisions
18,931.0
18,749.0
18,877.0
19,042.0
- Total Non-Interest Expense
12,160.0
12,116.0
12,826.0
13,582.0
50.3
50.8
51.2
49.4
51.6
+ Other Operating Expenses
Operating Income (Loss)
6,771.0
6,633.0
6,051.0
5,460.0
28.0
27.8
24.2
19.8
15.9
Pretax Income (Loss), Adjusted
Card Type
Credit Level
Rate
Annual fee
Rewards
Travel Rewards
Venture Rewards
Excellent
0/59
Unlimited 2X miles/dollar on every purchase. 40,000 bonus miles with $3,000 spent in first 3 months
VentureOne Rewards 0/
Unlimited 1.25 miles/dollar on every purchase. 20,000 bonus miles with $1,000 spent in first 3 months
Cash Back Rewards
Quicksilver Rewards 0/
Unlimited 1.5% cash back on all purchases, one time $100 bonus with $500 spent in first 3 months
QuicksilverOne Rewards
Average 25 39
Unlimited 1.5% cash back on all purchases, everyday
Average/ Building Credit
Platinum
Get credit with no fee
Journey Student Rewards
20.5
Build credit and earn 1% cash back, or 1.25% when paid on time
Secured MasterCard
Rebuilding
Refundable deposit of $49/$99/$200 gets $200 initial credit line. Access higher line w/ first 5 payments on time
Business Rewards
Spark Cash Back
Spark Cash for Business
17.5
2% cash back on all purchases. One time $500 bonus when $4,500 spent in first 3 months
Spark Cash Select for Business 0/
1.5% cash back on all purchases. One time $200 bonus when $3,000 spent within first 3 months
Spark Classic for Business
23.5
Get credit for your business with 1% cash back
Spark Miles Rewards
Spark Miles for Business
2 miles/dollar with 50,000 bonus when $4,500 spent in first 3 months
Spark Miles Select for Business
1.5 miles/dollar with 20,000 bonus when $3,000 spent in first 3 months
Credit Card
Rewards
Card Type
Rates and Fees
Credit Level
Travel
Popular
Secured
No Annual Fee
Exellent
Average
Cash
Student
Business
Low Intro Rate
Rebuilding
Credit Score Distribution
Interest Income account for about 75% of its revenue
Non-interest Income comes from the fees charged when providing services
Higher provision for credit losses is driven by higher charge- offs in the credit card, taxi medallion, and oil and gas lending portfolios, as well as larger allowance
FICO score is the credit score obtained from credit bureaus, credit card customers’ scores are refreshed monthly, and auto loan customers’ scores are measured just at origination.
Interest Income = operating assets * interest spreads
REAL CLIENT MANAGED PORTFOLIO
Source: Bloomberg
Company Website
COF 10-K Mar Page 81

7. Macroeconomic overview and drivers
Prime rate
Per capita disposable income
March 2017
March 2017
Estimated Value in 2017: 3.95%
Growth: 70 basis points
Forecasted Value for 2022: 5.64%
Growth: 168 basis points
Estimated Value in 2017: $40,208
Compound Growth: 1.6%
Forecast Value for 2022: $46,396
Compound Growth: 2.9%
REAL CLIENT MANAGED PORTFOLIO
Source: IBISWorld Prime Rate
IBISWorld Per capita disposable income

8. Macroeconomic overview and drivers
Aggregate household debt
Corporate profit
November 2016
March 2017
Estimated Value in 2017: $14.6 trillion
Compound Growth: 1.8%
Forecast Value for 2022: $16.4 trillion
Compound Growth: 2.3%
Estimated Value in 2017: $2.07 trillion
Compound Growth: 0.7%
Forecasted Value for 2022: $2.24 trillion
Compound Growth: 1.6%
REAL CLIENT MANAGED PORTFOLIO
Source: IBISWorld Aggregate household debt
IBISWorld Corporate Profit

9. REAL CLIENT MANAGED PORTFOLIO
Industry Overview
Commercial Banking
NAICS Code:
Revenue1
$553.2 bn
Profit
$117.3 bn
Annual Growth
-0.5%
Business
5,318
Source: IBIS World:
REAL CLIENT MANAGED PORTFOLIO

10. REAL CLIENT MANAGED PORTFOLIO
Industry Overview
Mature
Life Cycle
Low
Concentration
Heavy
Regulation
High
Industry Assistance
Moderate
Capital Intensity
REAL CLIENT MANAGED PORTFOLIO

11. Porters’ Five Forces Model
Rivalry High
Threats of New Entrants
Moderate
Buyers’ Bargaining Power
Low
Suppliers’ Bargaining Power
Threats of Substitutes
High
REAL CLIENT MANAGED PORTFOLIO

12. REAL CLIENT MANAGED PORTFOLIO
SWOT Analysis
Regulation change
Identity theft
Cyber attack
Rising interest rates
Strengthening Economy
Student loan demand soar
Limited geographic access
High segment operation concentration
High reputation
Effective M&A Strategy
Economies of Scale
Strengths
Weaknesses
Threats
Opportunities
Source:
trendsAndOpportunities.html?industryId=1316
REAL CLIENT MANAGED PORTFOLIO

13. REAL CLIENT MANAGED PORTFOLIO
Financial Analysis
Dupont Analysis (5 Part):
REAL CLIENT MANAGED PORTFOLIO

14. REAL CLIENT MANAGED PORTFOLIO
Financial Analysis
Texas Ratio:
Efficiency Ratio:
Texas Ratio: Measures the likelihood of bank failure by comparing bad assets to available capital (less than 100)
Efficiency Ratio: Measures the ability to generate revenue from nonfunding-related expense base (the lower the better)
REAL CLIENT MANAGED PORTFOLIO

15. REAL CLIENT MANAGED PORTFOLIO
Valuations
REAL CLIENT MANAGED PORTFOLIO

16. REAL CLIENT MANAGED PORTFOLIO
Valuations
REAL CLIENT MANAGED PORTFOLIO

17. REAL CLIENT MANAGED PORTFOLIO
Technical Analysis
Source: Yahoo! Finance
REAL CLIENT MANAGED PORTFOLIO

18. Recommendation $83.13 $95.23 $101.34 $98.29 18% Strong Capital Base
Current Price
$95.23
Residual Income Valuation
$101.34
Comparable Valuation
$98.29
Combined Valuation
18%
Upside
Buy 100 market
Valuations
Quality Loans
Strong Capital Base
Macro economy
REAL CLIENT MANAGED PORTFOLIO