Capital One Financial (COF)

Based on economic deterioration in the first quarter and recalibrated economic assumptions, the Company believes that managed charge-off dollars in 2009 will be higher than the $8.6 billion outlook for 2009 as was projected in the fourth quarter of 2008.

We expect monthly U.S. Card charge-off rate to cross 10% in the coming months. In addition to the effects of the weakening economy, the Company expects that in 2009 the charge-off rate in the U.S. Card sub-segment will be adversely impacted by (i) continuing pressure from the unsecured closed-end loans included in the U.S. Card sub-segment; (ii) from the implementation of the OCC minimum payment policies; and (iii) from the “denominator effect” as a result of the shrinking portfolio, resulting from lower purchase volume, charge-offs as well as the amortization of outstanding installment loans. The Company expects that the conversion to the OCC minimum payment policies will increase the U.S. Card charge-off rate by approximately 20 basis points in the second quarter of 2009, by approximately 80 basis points in the third quarter of 2009 and by approximately 50 basis points in the fourth quarter of 2009. The Company expects that the impact of the new minimum payment policies on the Company’s charge-off levels will begin to subside in 2010 as customers adjust to the new policies. The impact of the new policies has been factored into the Company’s expectations for charge-off levels in the U.S. Card sub-segment and in the Company’s outlook for total Company managed charge-off dollars. The Company expects the “denominator effect” impact to increase the charge-off rate in U.S. Card by about 50 basis points. Taken all together, the Company expects denominator and OCC minimum payment effects will result in about 70 basis points of higher U.S. Card charge-off in the second quarter of 2009, before any charge-off rate increases from continuing economic deterioration.

As of December 31, 2008, the Company’s allowance is consistent with an outlook for $8.6 billion of managed losses in 2009. This loss outlook assumes that the U.S. unemployment rate increases to around 8.7% by the end of 2009, and that home prices, as measured by the Case-Schiller 20-City Index, decline by an additional 10 percentage points by the end of 2009.

The Company expects 2009 provision expense levels to be higher than 2008 provision expense levels.

In addition to the effects of the weakening economy, the Company expects that in 2009 the charge-off rate in the U.S. Card sub-segment will be adversely impacted by (i) continuing pressure from the unsecured closed-end loans included in the U.S. Card sub-segment; and (ii) from the implementation of the OCC minimum payment policies. The Company expects that the conversion to the OCC minimum payment policies will increase the U.S. Card charge-off rate by approximately 10 basis points in the first quarter of 2009, and by approximately 50 basis points in subsequent quarters of 2009. The Company expects that the impact of the new minimum payment policies on the Company’s charge-off levels will begin to subside in 2010 as customers adjust to the new policies. The impact of the new policies has been factored into the Company’s expectations for charge-off levels in the U.S. Card sub-segment, as discussed above, and in the Company’s outlook for total company managed charge-off dollars for the next twelve months associated with the allowance for loan and lease losses.

The Company expects that the charge-off rate in the U.S. Card sub-segment will be around 8.1% in the first quarter of 2009.