Capital One Financial : Q4 2020 Capital One Financial Earnings Presentation

Fourth Quarter 2020 Results

January 26, 2021

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Forward-Looking Statements

Please note that the following materials containing information regarding Capital One's financial performance speak only as of the particular date or dates indicated in these materials. Capital One does not undertake any obligation to update or revise any of the information contained herein whether as a result of new information, future events or otherwise.

Certain statements in this presentation and other oral and written statements made by Capital One from time to time are forward-looking statements, including those that discuss, among other things: strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, expenses, capital measures, capital allocation plans, accruals for claims in litigation and for other claims against Capital One, earnings per share, efficiency ratio, operating efficiency ratio or other financial measures for Capital One; future financial and operating results; Capital One's plans, objectives, expectations and intentions; and the assumptions that underlie these matters. To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous factors could cause Capital One's actual results to differ materially from those described in such forward-looking statements, including, among other things: the impact of the COVID-19 pandemic and related public health measures on Capital One's business, financial condition and results of operations; general economic and business conditions in the U.S., the U.K., Canada or Capital One's local markets, including conditions affecting employment levels, interest rates, tariffs, collateral values, consumer income, credit worthiness and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; an increase or decrease in credit losses, including increases due to a worsening of general economic conditions in the credit environment, and the impact of inaccurate estimates or inadequate reserves; compliance with financial, legal, regulatory, tax or accounting changes or actions, including the impacts of the Tax Act, the Dodd-Frank Act, and other regulations governing bank capital and liquidity standards; Capital One's ability to manage effectively its capital and liquidity; developments, changes or actions relating to any litigation, governmental investigation or regulatory enforcement action or matter involving Capital One, including those relating to U.K. PPI; the inability to sustain revenue and earnings growth; increases or decreases in interest rates and uncertainty with respect to the interest rate environment; uncertainty regarding, and transition away from, the London Interbank Offered Rate; Capital One's ability to access the capital markets at attractive rates and terms to capitalize and fund its operations and future growth; increases or decreases in Capital One's aggregate loan balances or the number of customers and the growth rate and composition thereof, including increases or decreases resulting from factors such as shifting product mix, amount of actual marketing expenses Capital One incurs and attrition of loan balances; the amount and rate of deposit growth; changes in deposit costs; Capital One's ability to execute on its strategic and operational plans; restructuring activities or other charges; Capital One's response to competitive pressures; changes in retail distribution strategies and channels, including the emergence of new technologies and product delivery systems; Capital One's success in integrating acquired businesses and loan portfolios, and its ability to realize anticipated benefits from announced transactions and strategic partnerships; the success of Capital One's marketing efforts in attracting and retaining customers; changes in the reputation of, or expectations regarding, the financial services industry or Capital One with respect to practices, products or financial condition; any significant disruption in Capital One's operations or in the technology platforms on which Capital One relies, including cybersecurity, business continuity and related operational risks, as well as other security failures or breaches of Capital One's systems or those of its customers, partners, service providers or other third parties; the potential impact to Capital One's business, operations and reputation from, and expenses and uncertainties associated with, the Cybersecurity Incident it announced on July 29, 2019 and associated legal proceedings and other inquiries or investigations; Capital One's ability to maintain a compliance and technology infrastructure suitable for the nature of its business; Capital One's ability to develop and adapt to rapid changes in digital technology to address the needs of its customers and comply with applicable regulatory standards, including compliance with data protection and privacy standards; the effectiveness of Capital One's risk management strategies; Capital One's ability to control costs, including the amount of, and rate of growth in, its expenses as Capital One's business develops or changes or as Capital One expands into new market areas; the extensive use, reliability and accuracy of the models and data Capital One relies on; Capital One's ability to recruit and retain talented and experienced personnel; the impact from, and Capital One's ability to respond to, natural disasters and other catastrophic events; changes in the labor and employment markets; fraud or misconduct by Capital One's customers, employees, business partners or third parties; merchants' increasing focus on the fees charged by credit card networks; and other risk factors listed from time to time in reports that Capital One files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2019 and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2020, June 30, 2020, and September 30, 2020. Capital One expects that the effects of the COVID-19 pandemic will heighten the risks associated with many of these factors.

You should carefully consider the factors discussed above in evaluating these forward-looking statements. All information in these slides is based on the consolidated
results of Capital One Financial Corporation, unless otherwise noted. A reconciliation of any non-GAAP financial measures included in this presentation can be found in
Capital One's Current Report on Form 8-K filed January 26, 2021, available on its website at www.capitalone.comunder "Investors."	2

Company Highlights

• Net income for the fourth quarter of 2020 of $2.6 billion, or $5.35 per diluted common share; full year 2020 net income of $2.7 billion, or $5.18 per diluted common share

◦ Excluding adjusting items, net income per diluted common share for the fourth quarter of 2020 of $5.29; full year 2020 of $5.79(1)

• Pre-provision earnings decreased 13% to $3.3 billion for the fourth quarter of 2020 and increased 3% to $13.5 billion for full year 2020(2)

• Provision for credit losses of $264 million for the fourth quarter of 2020 and $10.3 billion for full year 2020

• Efficiency ratio of 54.64% for the fourth quarter of 2020 and 52.79% for full year 2020

◦ Efficiency ratio excluding adjusting items was 55.06% for the fourth quarter of 2020 and 51.66% for full year 2020(1)

• Operating efficiency ratio of 46.97% for the fourth quarter of 2020 and 47.14% for full year 2020

◦ Operating efficiency ratio excluding adjusting items was 47.39% for the fourth quarter of 2020 and 46.01% for full year 2020(1)

•	Adjusting items in the quarter, which are excluded from diluted earnings per share (EPS) and efficiency ratio metrics (see slide 15 for additional
	information):
		(Dollars in millions, except per share data)	Pre-Tax			Diluted EPS
		Impact			Impact
		Legal reserve activity, including insurance recoveries	$	37	$	0.07
		Cybersecurity Incident expenses, net of insurance		(6)		(0.01)
•	The quarter included the following notable item:
		(Dollars in millions, except per share data)	Pre-Tax			Diluted EPS
		Impact			Impact
		Equity investment gain	$	60	$	0.10

• Common equity Tier 1 capital ratio under Basel III Standardized Approach of 13.7% at December 31, 2020
• Period-endloans held for investment increased $3.4 billion to $251.6 billion
• Average loans held for investment decreased $1.8 billion to $247.7 billion
• Period-endtotal deposits decreased $283 million to $305.4 billion
• Average total deposits decreased $1.0 billion to $304.5 billion

Note: All comparisons are for the fourth quarter of 2020 compared with the third quarter of 2020 unless otherwise noted. Regulatory capital metrics and capital ratios as of December 31, 2020 are preliminary and therefore subject to change.

1. Amounts excluding adjusting items are non-GAAP measures. See Appendix slides 15-16 for the reconciliation of non-GAAP measures to our reported results.

(2)	Pre-provision earnings is calculated based on the sum of net interest income and non-interest income, less non-interest expense for the period.	3

Allowance and Provision for Credit Losses

			Credit			Consumer			Commercial			Total
	(Dollars in millions)		Card			Banking			Banking
	Allowance for credit losses:
	Balance as of December 31, 2019	$	5,395		$	1,038	$	775	$	7,208
	CECL adoption		2,241			502			102			2,845
	Finance charge and fee reserve reclassification		462			0			0			462
	Balance as of January 1, 2020		8,098			1,540			877			10,515
	Balance as of September 30, 2020		11,612			2,747			1,770			16,129
	Net charge-offs		(680)			(92)			(84)			(856)
	Provision (benefit) for credit losses(1)		231			60			(28)			263
	Allowance release for credit losses(1)		(449)			(32)			(112)			(593)
	Balance as of December 31, 2020(2)	$	11,191		$	2,715	$	1,658	$	15,564
	Allowance coverage ratio as of December 31, 2020		10.46%			3.94%			2.19%			6.19%

Fourth Quarter 2020 Highlights

1. • Allowance release of $593 million primarily driven by the impact of recently passed fiscal stimulus in Domestic Card and specific charge-offs in our oil and gas portfolio within Commercial Banking
   • Allowance coverage ratio of 6.19% at December 31, 2020, compared to 2.71% at December 31, 2019
2. Does not include $1 million of provision and related allowance for credit losses on available for sale securities.
3. Includes $28 million of foreign currency translation adjustments in Credit Card.

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