Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - CAPITAL ONE FINANCIAL CORP | d8k.htm |
| EX-99.2 - EXHIBIT 99.2 - CAPITAL ONE FINANCIAL CORP | dex992.htm |
 1
August 10, 2011
Acquisition of HSBC Domestic Card Business
Acquisition of HSBC Domestic Card Business
Investor Presentation
Investor Presentation
Exhibit 99.1 |
| 2
Forward Looking Statements
Forward Looking Statements
This presentation contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act giving Capital One’s
expectations or predictions of future financial or business performance or conditions. Such forward-
looking statements include, but are not limited to, statements about the projected
impact and benefits of the acquisition by Capital One of the HSBC domestic
credit card businesses, including future financial and operating results, Capital One’s
plans, objectives, expectations and intentions and other statements that are not
historical facts. These forward-looking statements are subject to
numerous assumptions, risks and uncertainties which change over time. Forward-looking
statements speak only as of the date they are made and Capital One assumes no duty
to update forward-looking statements.
In addition to factors previously disclosed in Capital One’s filings with the
U.S. Securities and Exchange Commission and those identified elsewhere in
this presentation, the following factors, among others, could cause actual results to differ
materially from forward-looking statements or historical performance: the
possibility that regulatory and other approvals and conditions
to
the
transaction
are
not
received
or
satisfied
on
a
timely
basis
or
at
all;
the
possibility
that
modifications
to
the
terms of the transaction may be required in order to obtain or satisfy such
approvals or conditions; the possibility that Capital One will not receive
third-party consents necessary to fully realize the anticipated benefits of the transaction; the
possibility
that
Capital
One
may
not
fully
realize
the
projected
cost
savings
and
other
projected
benefits
of
the
acquisition
of
the HSBC domestic credit card businesses in the event that Capital One's pending
acquisition of the ING Direct business does not close timely or at all;
changes in the anticipated timing for closing the transaction; difficulties and delays in
integrating the HSBC domestic credit card businesses or fully realizing projected
cost savings and other projected benefits of the transaction; business
disruption during the pendency of or following the transaction; the inability to sustain revenue
and earnings growth; changes in interest rates and capital markets; diversion of
management time on transaction-related issues; reputational risks and
the reaction of customers and counterparties to the transaction; and changes in asset quality
and credit risk as a result of the transaction.
Annualized, pro forma, projected and estimated numbers are used for illustrative
purposes only, are not forecasts and may not reflect actual results.
|
| 3
Transaction Summary
Transaction Summary
Receivables Purchased
$29.6 billion
Premium Offered
8.75% cash premium or $2.59 billion as of June 30, 2011
Approvals
Customary OCC approval
Platform Acquired
Partnership infrastructure
Real estate and data centers
Capital
Tier 1 common equity ratio expected to be in the mid-9 percent range at
the
end
of
the
second
quarter
of
2012,
including
planned
capital
raise
of approximately $1.25 billion; Capital One has the option of issuing
$750 million of the $1.25 billion to HSBC at $39.23 per share (the
average of the closing prices of Capital One shares on August 8 & 9,
2011)
Intangibles & Goodwill
Goodwill of ~$1.2 billion
Purchased Credit Card Relationship intangible of $2.9 billion
Fair Value Mark
2.8% fair value mark
Restructuring Charges
$420 million
Operating Expense
Synergies
$350 million, or 23% of HSBC Domestic Card business expense base
Expected Closing
Second Quarter 2012 |
 4
The HSBC domestic credit card business is attractive
The HSBC domestic credit card business is attractive
Profitable
national-scale
card business
Profitable
through Great
Recession
Strong
management
team
Premier retail
partnership
franchise |
 5
Retail
Partnerships*
Co-Branded
Partnerships*
Bank Card
The HSBC domestic credit card portfolio is comprised of
The HSBC domestic credit card portfolio is comprised of
three business segments
three business segments
•
General Motors and AFL-CIO co-
branded cards
•
3.3MM active accounts
•
21 partnerships, including Neiman
Marcus, Saks Fifth Avenue and
Best Buy
•
13.6MM active accounts
Card Portfolio Business Segments (~$30B)
($B as of 5/31/11)
•
Primarily MasterCard branded
•
10.3MM active accounts
•
Includes some run-off portfolios
*The transfer of certain partnerships in the HSBC domestic credit card portfolio will require the
consent of the applicable partners. To the extent that the Company does not obtain the
consent of any such partner, that partner's relationship and related card balances will be excluded from the sale to the Company.
Source: HSBC financials
Bank Card
$9.4
Co-Branded
Partnerships
$7.6
Retail
Partnerships
$12.7 |
 HSBC
has built a premier partnership franchise HSBC has built a premier partnership
franchise 6 |
 7
Acquiring the HSBC domestic credit card business
Acquiring the HSBC domestic credit card business
significantly expands and enhances our Card franchise
significantly expands and enhances our Card franchise
$B
U.S. Credit Card Outstandings
Q1 2011
U.S. Private Label Retail Card
Outstandings
2010 Year-End
$B
$68
Capital One
HSBC
$17
Capital One
HSBC
*Chase includes WaMu; B of A is US consumer card; Citi excludes Citi Holdings,
Capital One is domestic card; HSBC excludes ~$13B of retail HSBC partnership
outstandings; AmEx excludes charge-card, Discover includes business
card. Source: Company reports, Nilson 2011, HSBC financials
$21
$44
$73
$107
$129
$49
$51
$0
$20
$40
$60
$80
$100
$120
$140
$4
$4
$3
$5
$27
$30
$4
$0
$5
$10
$15
$20
$25
$30
$35 |
 8
HSBC’s domestic credit card business remained profitable
HSBC’s domestic credit card business remained profitable
throughout the Great Recession
throughout the Great Recession
3.2%
1.4%
1.4%
3.4%
4.9%
3.9%
5.1%
1.0%
3.0%
1.2%
0%
1%
2%
3%
4%
5%
6%
2007
2008
2009*
2010
Q1 2011
ROA
2007 –
Q1 2011
Capital One
HSBC
Note: Data shown is post-tax. HSBC post-tax figures calculated by
assuming a 35% tax rate. COF data is Domestic Card. Accounting is IFRS
for HSBC. HSBC P&L includes GPCC & PLCC.
Source: Company Data
*HSBC Q2 09 excludes $350MM (post-tax) goodwill charge.
3.5%
2.4%
0.8%
1.0%
2.1%
4.5%
0.4%
0.5%
0.5%
2.7%
0%
1%
2%
3%
4%
5%
6%
2007
2008
2009*
2010
Q1 2011
ROA excluding Allowance
2007 –
Q1 2011
Capital One
HSBC
0%
2%
4%
6%
8%
10%
12%
14%
16%
Capital One
Domestic Card
HSBC
Total Book
Monthly Charge-Off Rate |
 9
We expect the acquisition of HSBC’s domestic credit card
We expect the acquisition of HSBC’s domestic credit card
business to deliver compelling financial and strategic results
business to deliver compelling financial and strategic results
•
High-teens GAAP and operating EPS
accretion in 2013
•
Return on invested capital greater
than 25% in 2013
•
IRR greater than 20%
•
ROTE improvement of ~400 basis
points in 2013
•
Strong EPS accretion drives 4 year
earn back of expected tangible book
value per share dilution
•
Strong capital generation
Compelling Strategic
Value
Attractive Deal
Economics
•
Expands and enhances card
franchise
•
Establishes market leading
partnership platform
•
27MM new active accounts
•
Technology and capabilities
significantly advance partnership
franchise
•
Excellent fit with Capital One’s
proven capabilities in credit card
business
•
Significant financial and
strategic upside
•
Low business execution risk
Anticipated deal economics assume closing of ING Direct acquisition and are based
on IBES EPS estimates pro-forma for the ING Direct acquisition |