Nothing is out of reach when 17,000 people set their minds to something. 

Capital One ® came of age in 2003. Our business diversification strategy, put into action in 1998, delivered its first substantial contributions to the bottom line. The Capital One brand, virtually unknown four years ago, achieved near-universal recognition among American consumers. We created a new management structure to meet the challenges of running the large and dynamic enterprise that Capital One has become. 

Once again, our associates delivered record earnings, with the addition of $11.5 billion to managed loans and improvements in credit quality. Net income for the year rose 26%, to $1.1 billion, and managed loans increased 19%, to $71.2 billion, solidifying Capital One’s position as a leader in consumer financial services. 

Nine years of rapid growth have dramatically changed our metrics, but through all of the changes, we’ve worked hard to maintain the high quality of our financial performance. And as we’ve grown, two things have remained the same: our core strategy and our values. The heart of Capital One’s Information-Based Strategy (IBS) is a rigorously scientific test-and-learn methodology that has enabled us to excel at product innovation, marketing and risk management—the essentials of success in consumer financial services. The Company continues to thrive by living its values: Excellence and Do the Right Thing . These values are the bedrock of Capital One, and they guide everything we do. 

Our U.S. credit card business continues to generate powerful earnings: $1.2 billion in 2003 compared with $1.0 billion in 2002. As we predicted, our charge-off rates declined during the year, thanks largely to improved credit performance and the continuing diversification of our products and markets. 

Our quest to take our strategy into new markets is paying off. The new businesses we’ve been building overseas and in other U.S. lending markets (auto finance, installment and small-business loans) are now significant drivers of earnings growth. Collectively they contributed $203 million, or 18%, of the year’s net income. They account for more than a third of managed loans, another sign of the continuing transformation of Capital One from a credit card company to a diversified consumer financial services company. 

As we continue to grow and diversify our businesses, Capital One has focused on building strong risk management and corporate governance practices throughout the Company. I am pleased to report that this focus has positioned us well for the future and increased the confidence of our external constituencies in our ability to continue to drive profitable growth. 

