Discover Financial Services (DFS) 25 Oct 222022 Q3 Earnings call transcript

Good morning. My name is Katie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2022 Discover Financial Services Earnings Conference Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions] I will now turn the call over to Mr. Investor of Head Wasserstrom, Relations. Eric Please go ahead.

section Katie call. I’ll you, presentation, you the and investorrelations.discover.com. Relations of good today’s to which financial in find Welcome everyone. can our begin earnings Investor website, morning our Thank of on X Slide

Our materially. statements are release, Please statements our regarding risks certain refer subject cause actual that forward-looking that presentation. and forward-looking our release earnings uncertainties to press and may contains third appear results discussion to today that and to quarter’s in differ notices

call will Hochschild; session. our time Chief After Our today our be include CEO, question-and-answer conclude and Financial remarks Roger we formal from will a our comments, there John Greene, for Officer.

question. will permitted please question session, question, ask Q&A return to you the the During be your After queue. follow-up one to follow-up one followed by

my it’s Now, over call to the pleasure to Roger. turn

listeners performance to Against this today’s Thanks, financial strong macroeconomic our I’m and fluid our advance results a for Eric our pleased quarter. priorities. strategic very while to joining continuing generate with we thanks call. backdrop,

a Let’s Slide on start summary X. with

For we net $X reported income share. tax $X.XX after per billion quarter, or the of third

earnings. Over a backdrop, restrictive, the more fears three made it Against become of our balance quarter of the strength quality has of more our has months, the as Fed this the narratives of the past are key acute. third recession policy results and sheet

mid-XXXX. growth with elevated XX% since the this in by revenues new number and accounts up year has strong been loans increase increased we’ve receivables by This Our driven volume driven growth largely year-over-year. sales largely was added of our

credit which to considers use to all cycle, stages approach continue We a of through-the-cycle downturns. including underwriting, a

underwriting quarter. management, conservative tightened we our our new of criteria account marginally part credit this As

loan of consider these our concerns with to credit elicits of our about session – current macroeconomic Given performance consistent quality, of credit conditions. the Naturally, discussion but we be factors, growth changing late-cycle awareness requires portfolio not gradual a normalization. at a than of suggest financial conditions the condition. our importance does other of and Nonetheless, environment strong this stage underscores particular anything

strategic priorities. also to We our advance continue

in signing new of Woori expanded As of The global focus on of the as this South year number partnerships few largest announced we well Korea. presence we’ve examples, extension our our as a network August, this Card the expanding in international relationship highlight issuers of our with the presence.

the fintech to partners. with our continue We our relationships demonstrate value growing and of network

As we payments which manual. primarily will an industry system, in still for October is that TYDEi’s streamline in announced where and healthcare vendor digitize example, we purchasing facilitate payments an management new will legacy

opening our Analytics summer, our this location. we Center Advanced the of Resource new at announced Finally, downtown Chicago

started, we grow Chatham neighborhood John jobs first more opening Chicago Side year I’ll additional cohort X,XXX this supporting of care great of to underscores review while customer we The in the to over applicants earlier in now South over follows to which our to detail. has experiences. the the call and commitment turn results of bring our to additional the cohort customer XX program with already and in our from This center individuals, grand an selected XXXX. intend

X% NIM The on Thank interest net everyone. asset year-over-year. There expansion Roger, increased summary financial morning, a three and modest you, margin were with start improvement good and trends rate strong growth, the sequentially results growth, Slide and credit our quarter: XX% with in in I’ll important normalization. asset combined revenue X. strength

CECL increase coverage reserves in an $XXX under reserve of but our in resulted our declined growth slightly. Asset ratio million,

the our have for while down X% year-over-year, reported net would on a change, income basis. reserve been So net higher was our XX% adjusting year-over-year income

points driven million margin. by basis interest points new and funding prime basis XX accounts and reflects the XX a partially and year-over-year increased half Receivable the net balance receivables growth this On we year-over-year, increase transfers. sequentially. into in card, year. or the NIM rate in a We high up growth was higher Sales and XX%, primarily promotional last interest by the sequential by income sales reflecting which XX.XX%, the on year-over-year period, $XXX the Let’s details net of the record interest growth achieved growth and margin experienced starting review increased Net both from from the rate, was the driven in from year. offset average was Slide basis, XX% a higher X. and higher deceleration year and first up XX% XX% continued costs strong of improved year contribution prior

anticipated, payment sales XX points basis quarter. in by basis more Nonetheless, XXX over than XXXX points the in fell partially was remains mitigated As a the decrease levels. decline the rate, which it

to We support should growth. rate payment of to through which decline expect half XXXX, receivable the continue back help

to loans particularly Turning to non-bank originations. for our season the created originators. marketing, this market, pricing and believe organic peak were to of Personal the XX%, we product, our a non-card result competitive some X% approach growth reflects products, student in increased relative underwriting has an which position attractive as of up us disciplined loans

balances funding sequentially. and year-over-year terms X% up In of mix, our were customer deposit X%

So has expected rate environment. pricing what line deposit a been far, we in in with rising

but has the mix, we funding our to XX% of strong various continue deposits As funding over target quarter, to caused last growth term. mentioned we our deposit to medium XX% asset proportion

broad card ABS billion $X a variety sources, $X of We funding growth. us broker our enabling confidently maintain fixed to We of of issued notes also asset quarter in access the booked to fund deposits. billion and

XXX growth to investments to year-over-year, our this compared million in was quarter. Adjusting sales increased Looking by the at Slide income basis the XX%. due This of offset driven quarter cost basis to in $X a our quarter, or we Year-to-date, driven The basis our X X favorable X the X rewards points the new estimate back revenue, strong Non-interest $XX points sales strong was with mix, revenue XXX rate period. our interchange reflecting to non-interest expenses. reward sales net higher higher points also was that was consistent points higher increased last our rewards annual XX%, up expectation This partially up reward these, drove equity basis inflation contributed and other prior on or income sales million of prior and $XXX between X. for Consistent in basis on rewards loss substantial discount points program. of with costs. year $XXX by cash inflation. by up which and million of basis accounts, points, million loss a rate our XX%. increasing partially is rate Similar growth quarter,

million up XX% from year-over-year were were costs quarter. Moving and to the or XX% expenses on prior up Slide increased primarily expenses $XXX to X. Total operating headcount. up Compensation due

Our a value servicing of proposition. our is organization key component

assets to our of increased Marketing million new accounts our invest an in card fees and XX% grew as card expect continue expenses quarter. contribute increased grow salary products. We $XX by as last investments for growth consulting and third as expand. $XX we in increase year’s Professional This into and wages banking increased in through million accounts next and to year from a result consumer technology costs. XX% We to or this this will or of year. the and end XX%

quarter. as increased We volumes well also by the costs our had elevating bank, additional fraud other legal driven expense some in as in expense consumer the category

evidence was million X.XX% the from $XX consistent Similar levels. with to charge-offs prior or basis beyond normal our XX emerging up the net basis XX will Slide absence remain charge-off that of credit than not lower but next expected baseline credit a macro from prior million over performance commentary only delinquencies sequentially. been higher basis segment points in our and but Total on quarter, our lower credit we $XXX pre-pandemic the down conditions. in card normalize X.XX% normalization. charge-offs points quarter. Delinquencies prime to the the charge-off Total year stress are dollars year net continue were to below year, the rate than X net X. prime quarters’ points portfolio, were have last upper prior higher Moving expectation normalized, X and of prior seeing several basis up sequentially. and is the In among points change This from

discussion allowance balances. $XXX million X. receivable to we the our quarter, of higher on allowance Slide due our by to increased past This Turning

rate to reserve declined modestly X.X%. Our

us, employment changes the most through risk conditions to pose – levels. For significant to loss

the part process, considered we a As unemployment macroeconomic scenarios prospects have higher our of of our reflected is reserve balance. in of range among reserving and

Looking at Slide XX.

driver Our was for prior basis common the was asset from the The Tier primary of a XX approximate point strong the equity period. period decline growth XX.X%. X

XX.X%. Our long-term target remains

Slide on $XXX suspend decided the a and return, of capital of our period of share terms per In we we million quarterly $X.XX temporarily common to repurchased activity. common buyback stock Concluding in dividend before declared XX.

remain at look are of last for the favorable, quarter we our our we of once improving prospects again elements As and expectations. year, the XXXX

on strong the rates high account acquisitions some improvements loan to recent through support quarter in We and third teens, confidence are growth revising our our the payment continued sales, view outlook. in the new

that of improvement full sequential in quarter mildly expect hikes margin range In happened the September. expected NIM, based year we be late rate high the of to our terms above on end fourth in with the

as expense previous come and XXXX expect year, prior costs our by to digits communications, outlook costs. with driven still to high revising discussed. In we we’ve are above marketing up the line versus be We levels increased compensation marketing single in

salary and well to wages expect headcount, We elevate as as which will expense. add benefit

categories, the these to Excluding losses We single year, expect X.X% to increase in low lower-than-expected the net year. driven X.X% now expected full by be charge-offs are this point credit between expenses two through for by digits. and

rate new elevated our digital on demonstrate approach slowly expectations credit summary, and benefit to is performance repurchases repurchases accelerated and rate. from continues pause temporary management. share results In the normalizing, before to but strong are These prime place, resiliency from resume we costs of payment banking reflecting remains integrated in growth acquisitions NIM to underwriting and as and our consistent sales, continue year-end. Our hope to increases. in improvements the Funding share benefit credit model. receivable with account payments disciplined we

balance us to capital keeps position, for for power, coupled with that, the conditions. Our profitable open positioned turn growth through call I’ll With Q&A. line strong operator, to economic a earnings well our our range continued Katie, back and of the sheet

Goldman Thank you, We’ll first [Operator Ryan Sachs. with our Instructions] sir. Nash question take from

line is open. now Your

guys. morning good Hey,

morning. Good

levels? just margin? that deposit continue line I out. around what terms betas their to do I’m think curious; within interest quarter. hold maybe net that the talk So on just another we Can John, at the maybe the implies go end of the margin you that on hikes we of start rate talked you quarter; these in saw you you peaking about given like? and about it it is think potentially And here where you uptick to maybe last from commented can incorporated the the

Great.

a Okay. There’s for the Thanks question, Ryan. there. lot

So, that let me fundamentals seeing. with we’re the start

So general quarter; competitive certainly upside result sheet expect the across the funding costs With side Fed result said, as of we attract in actions deposit of that delivered September. that third we some deposits. to balance plus increases needs hikes the the the and some market liability as the is subjected do from XX% of in to a in a

So we’ll fourth quarter, improvement. into see sequentially the certainly, further

– Now, quarter see fourth beyond the – excuse me, improvement. beyond the into we’ll

seismic fourth of margins Beyond on I I’ll base net of any going sources this interest stability the reserve and turn what say, any based we’re XXXX quarter in funding to is, commentary. changes we the say don’t would at to multiple expect funds. access our But point, specific, to

Roger, color. Got one it. the for for Thanks maybe you.

intermediate tightening you what some for this you’re Can of acquisition. might additional mentioned mean just growth the marginally to regarding account you making give term? color are changes And maybe do you the think underwriting? You Thanks. over guys on

Sure.

by start saying, would a good in it very I So, environment. general, remains

below had cost is seeing We’re prime The side on per value resonating what well. the last year. account proposition we

those margin, For of we a that volatile most be in will segments account downturn. the at the new space some tightened

strong further very I’d So, environment, to of a And good such why the I action the again, say prime. seeing part portfolio new ready But think that’s you’re and end on or growth. we’re lower of overall, side. take accounts

it. the Appreciate Got color.

you. Thank

come from with will question Suisse. next Moshe Our Credit Orenbuch

open. is now line Your

and a maybe was a seeing for environment Thanks. from standpoint could competitive hoping loan installment the you you’re student maybe both in different little outlook standpoint, competitive credit and loan your what I and personal about a businesses, tack. the kind Maybe talk and bit a talk two loan Great. little of that of, business for in there talk from the about a business a bit the and marketing moment?

Yes.

are. are in is of them broader much I than hard are So Moshe what it spectrum individual lenders to know competitors we would doing. general, most say

my so at we’d of the seeing their is guess And lower be ends books. some stress

a which debt of personal our focus a the on creates consolidation, loans. use For lot of is primary environment us, rising rate

we’re in credit originations disciplined So, seeing segment. strong maintaining criteria very a that by

interesting. question we’ve of Got higher do you the think your XX mean, others little about it. end. the see credit by I bit Follow-up causing end restart talked at at for the you’re I about It we basis lower where I that point but capital, are so, had the buyback downtick talking spectrum of is year-end Thanks. seen a well that above. or stress a to that hoping is, in growth kind still you’re the

the about macro figure talk and about, the – Just the that? once restarts? for appetite buyback Thanks. guess, kind of does appetite the for I that talk Just given environment into that

that. take I’ll Moshe, Sure. Yes.

we’re are CETX. XX% capital from level, XX% So, So overall approaching, right? very well the capitalized, on a we

XX.X%. book very, stable. has is been but stable. overall, credit very Our very target very, normalizing, The It’s

So the firm the remain place. through allocation in priorities capital

to first growth, in capital, acquisition, Payments will we’re then perhaps invest would going do be segment. return is that second So likely be organic a and the strong in of and to third, a bolt-on

change. didn’t priorities those overall, So

place, resume here suspension buybacks resume it the in fourth So hopeful remains in that but will the quarter. will we’re –

Thank you.

you. Thank

Sakhrani next Our from with question Sanjay come will KBW.

line open. Your is now

Good Thanks. I walk to through increase. the wanted expense John, just guide morning.

and trying then put a sort increase? trying it’s like how what of blend the headcount contributed as the comp as back in pulling changed just marketing I’m figure the related that parse of to terms much comp to far And of cost? slightly to Could you mentioned increases, I’m And was credit just out marketing part You – box. to is the to just the costs. the apart of what growth? comments each

Yes. Yes, that, Sanjay. happy to help with

me context upfront provide So some here. let

is is total our year-to-date expenses X%. year-to-date X%. and Comp excluding expense up X%, expense So up marketing, are up base

I’ll really, quarter some actually strong say So really into half this of the fundamentals. first what year and

a depending base, service. going have And to balance significant that we’re our there about we might came course, out Now, seen press of the that means next and hiring we did a release servicing which were metrics. through balance agents and year on have this that and value into asset growth are customer accounts X,XXX you of year indicated in to that the have the proposition sheet

that. and and to growth continue technology, We’ll acquisition able has information So specific grow around necessitated advanced in We’ve investments investments also customer further people. targeting. made order enhance also overall, analytics the resources be specifically in strong strong the underwriting profitably our to to and then do in us position to

I salaried last So, we a on what year. is what us coming the result as say a in some term. turnover well resources, And of customer investments say with quarter as I’ll is then long backfilling seeing investments here third for of the service. of talked as And resources terms about the those combination is tough sense make believe in I’ll what a perfect comp all you’re

So some and context question. your color provides hopefully, to that

know of then read to to you a timing. correct are about investigation are very the as it inquiry the But lines of clear, And we’re how to relative thinking helpful. a things change to there seems just statement? just Is or the in progressing concerned, servicing and Okay. no last matter trying student And between guys are to it is be terms it’s as you it as loan going that’s quarter. expected that I far That’s expenses on. like

a that statement. is Yes, correct

specific related we’re some buybacks no the question going I guidance those updates and news changes provided and related expenses the to expense no The on items we to it. reflect to have to your as change. So previous discussed mentioned. when share share, we Obviously,

you. Thank Great. Okay.

you. Thank

Our Jefferies. next come Hecht from question will with John

Your line is now open.

ask about Good intermediate perspective my guys. around in we you your have maybe really and the spend that the haven’t to maybe environment morning one – on topic term? what recently competitive questions since means rewards Actually, rewards and that just it’s I asked, a talked But and because addressed you about detail for most about talk been of the was marketing. going patterns, can

Sure. Yes.

a segment, long the the So talked rewards are competition two, putting lot how we’ve propositions last and we aren’t prime the sustainable necessarily over issuers most out super on run. or think some in of intense in is year the of the

costs moving our mentioned, John As rewards are we exactly up forecast. as

felt haven’t changes We the to need make structural any our to program.

competes prime as that can in revolver value very our growth well proposition you accounts, new So see segment. from in the the

market the competitive, always bring we proposition consumers. that with while a so well And resonates differentiated is value

like can rates to question there something XXXX? probably kind recent different in about second is XXXX thinking it’s of – what there of cohort, then seasoning early what Or worth pointing and maybe back it the tell respect terms know And and that’s for Okay. utilization more I a out us they’re delinquency cohort, how it XXXX in is you Is with like is looked seasoning? to but vintages?

expectations, Yes. are say in vintages line exactly performing every with during right? our mean distorted recent would pandemic. got vintage the I more I

it So about feel we again, across very you cut the good the performance. But curves. saw

Okay. Thank you guys.

you. Thank

Our next from question with will come Evercore. Pancari John

now line Your is open.

Good morning.

morning. Good

that you just quarter, your around came expectations, that expense making quarter. the could importantly the ratio the Thanks. up and gave that you efficiency into could commentary shape about there? about how how the for maybe the the On can around us more And help XXXX, trajectory and in XX% we for investments you’re think third given fourth think

question. the for thanks John Yes.

And in job what said [ph]. is pretty an this Certainly what in XXs through investments some year, what ratio and first half expense efficiency we’ve a of we’ve on reflects and despite and being the third great performance on the quarter targeting base. and the investments, done terms the we’re that. the really good high XX%. And to in growth we strong those the – still past Board below expense So, through then able told deliver the our

continue where approach a make we great returns we for to like little have that we tougher. we’re investments our And remaining continue shareholders. do environment an asset the are aware make. tailwinds have terms We’re to growth to do is of to see XXXX, we going investments and going in as to drive opportunity feel we economic We

to remain So, discipline overall expense and investing I efficiency in come out details. would But to XX% place, south in for commitment while we specifically, ratio give commitments growth. more operating will say of specific for leverage XXXX January the and positive

Okay. then economic of normalization the of as looking in we to get Thank factor reserve ratio you. in this front, think here? see some as indicated conditions you the the the that should I take That’s look on that helpful. the reserve you just bit the on out? impact trajecting pressure you’re here, and terms the of delinquencies, how But And economy, seeing how to Thanks. a and bleed some how wanted reserve quarter. particularly on on allowed know economy the about the you you your as at the now you’re you plays

that Yes. thanks Great. question. Yes, for

little bit context there. of a So

So, the we put on billion about in $X.X billion of assets to worth quarter. $X.X

$XXX Our reserves increased by million.

– some very recession the about environment, macro we are Roger mild as tightening. increasing. normalizing. The about we’re comments in some portfolio at mentioned be to very, of in seeing the macro indications portfolio stable a environment look comments his mild his continuing certainly So, the but and

to at macros. calls terms multiple make and balance run the on specific reserves, be reserves the really as other to then do, add to we to and appropriate of macros, sure a portfolio anticipated take for We’ll watch targeting stability. going give that the the tough continues revolver perform than under mindful we’ll to prime So scenarios make of expectation the in tends portfolio, any look we’re GAAP. It’s will to sheet, guidance and around specifically continue high-level that continue

be matter to of rather As fact useful that charge-offs. reserves, other specific one may point but not

XXXX back of X%. is see charge-offs that north You second to to quarter the of all way rates – have to charge-off go the that

So, great year next year, expect we’re and seeing be it as this we well. stability to stable

it. Got

questions. my taking for thanks Okay,

Thank you.

question Our Graseck with from Betsy come next Stanley. will Morgan

open. Your line is now

morning. good Hi,

morning. Good

pricing thinking you’re I wanted could in changes unpack you speak little how XXXX. that and to about to but know you the I deck, – detailed could your I get seismic I you loan know see about thinking out just the bit on no how you’re if Maybe yield we in bit, slide how Fed how and prime a called a go statement should loan that understand yields obviously, just through little how help traject. and continue the with from works? impacted changes. you’re you promotional rate trajecting the a by of driven How yield about a offset higher but was period hike much timing mix thinking here? mix partial the and loan promo the to that we Could timing as us

Okay. Yes.

know, as fairly And a complex do there’s here. So I’ll to you Betsy, best some my lot there. it’s transparency create but

the – me let So and with loan yields. start

rate So the XX% floating of asset side. of our book is

rate So And the with the as down. the changes. the Fed to down, Fed opportunity to move increases, the were contract that up rate come contract Fed correspondingly, the come would creates if

seeing what in to of We X is rate a rising So, expect still basis points yield environment. X we’re improvement. basis points there

a So margin improvement yield net XX-month interest period. over

September. and be late couple the Fed think reductions Fed I way the a be there then rate will in action basis next as on there pause. we points maybe of further XXX as of It or this more a significant don’t in So, increases there’s looks XXXX. could year, be much much year, forward curve, maybe the economy, like there’ll as as based saw on depending another until

that portfolio. to from rate what get benefit the So we’re going the into means increases the Fed is,

go seeing continue pricing to deposit up. We’re

think positive proposition question do what our next a base. you been to We betas sure the haven’t customer And we Certainly, value for then would about be on price follower betas. been a around leader that. we’ve make a have and

to now. try that right to address I’m going So,

plenty a of of help the attractive should customers further find So rates between from rate banks. increases. impact value opportunity deposit market as proposition, and disparity an for which those to It there’s dampen our standpoint and they’ll greater creates into the us brick-and-mortar

but incremental Fed us So, the combination environment, credit bit think book, rate which of the standpoint, of create deposit but do able impacting rising that for interest to decisions manage the good then make normalization, flexibility a we a net pricing the make to we’re our a going will for shareholders. interest from we where sure and ultimately, our being reversals in customers making to decisions And increases, stability have margin. we’re

nets margin it expect stability XXXX. that ultimately, interest So out we relative net over through

put that out Got put buyback I would Okay. to indicates it. resume no appreciate buybacks? after the follow-up in that only started, expect about do hear can has you you that the you XQ. an know that resume to discussion X-K, into obligation can a My to there’s Thanks. with you I you Thanks. now can And market mentioned Or that. hopeful we resume. And buybacks it had earlier. you’re notification we Would that

Correct. There an isn’t an obligation, but we X-K would likely put out.

Okay. do it. but No would you obligation, likely

Okay. Thanks.

Yes.

you. Thank

Blair. come with William Napoli Our from will next Robert question

open. now is line Your

Yes. morning. Thank and good you

to buybacks. capital guess on – to the XX.X%? your that following what I up to you. a review what I you like buffer target them you to was towards want do And do XX.X% So, would get frame Or is it time your kind over of that? would to go suggest good would ratio? you above expect But behind the that just hear resuming that

quarter. consistently to fourth have buyback the Yes. the on this I be to said. in we very our Hey for hope comments that been resume call question. you specific the here just about Bob, want And something thanks

be that with. So, we’re Board hopeful, there’s it because the we helps decision that but a will ultimately, say

So step there’s been have in we said to of towards terms so for north well target, want intend that. – we’ve towards that we the step some we of that time, to XX.X% quite that,

earnings as to power firm that buybacks the our there. get certainly, the as well generated the and have So impacted has dividends, ability

So that said XXXX XXXX. XXXX. XX.X% the target, to previously when we hope sometime in to step and What XXXX throughout or is, be around we’re towards going we

you. the normalization Thank of credit on just And losses. follow-up,

history, we losses looking credit I that mid-Xs high-Xs, Is credit losses normalized area? should to personal think or normalized we credit continue in X% cards, about the over that there, Should that’s high-Xs an anything guess, range. think? we the about loans As way there changed? in to of kind think Is back

Yes. Yes.

there. So, would two points I put out

that the First, take historical a at and I would make and judgments. look use trends certain

The to have credit of increased folks economy say payment a debit without I a priority card card, a in because around with but I’m going digital that other can certainly, is item most access have here, the card. credit a cards – belief folks the But credit matter a judgment. some specifically

So prioritize that a among the obligations credit other many card debt helps that, I has. believe, primary consumer

impact charge-off outlooks. that yes, say My could but what is, working your your relative So through apply the you’re I’d forward-looking the versus rates historical trend? belief should judgment is you when

Thank you.

Thank you.

question next with from come Our will Fandetti Don Wells Fargo.

Your open. line is now

John, personal loan growth was pretty strong this quarter.

your outlook home Just wanted there also initiative? equity And updates on on lending to growth. any the your thoughts get and

the thanks Yes, for Don. question, Yes.

So certainly, nice growth there.

go quarters back result quarters, loan in Actually, some go back personal you the was it underwriting four been there’s said flat. for us – as a a three front, and greater confidence was product, and of the that given few underwriting able if we On flat to it level of set we appeal in down. be a And strength you to to decisions it’s and to product, we We’ve that it. took. or high been market

the tougher drive like product meeting needs, growth. feel product its helped that’s But mindful in to and customer of we a good economic a face and So, the the we’ll it’s continue of certainly, condition. be

equity more is that I’m the of start to if was loan, forward-looking not it of home do guidance, kind I product that small. kind But to I often. level, relatively of terms go going at all would to a In do wrong ensure that’s the portfolio is

second moving first a and at seen lien great this originating product, dial well. lien it’s standpoint. product But an level interest the not of also in what is So the from earnings a as point we’ve actually we’re

So performing well both are appeal. products and nice

Thanks.

Thank you.

question next of Our with will come Mihir Bank Bhatia America. from

is line now open. Your

XX.X% and and right Good to comments least my then $X frame with Am taking billion that growth, loan loan think take wanted just question. and works for stability. thinking about given I from you of NIM think about the about to plus fourth your for NIM quarter NII. start if exit And for of growth rate Maybe I effectively the at NIM? point it and there four that way out morning. just Is that out Thank works I your NII NIM – correctly? NIM, guidance of and just increase should you

Yes.

about the We going as So expect on I’m appreciate go as said sequential NIM said. the here this to Mihir, probably far for certainly specificity. do I’m What I’ve thanks question. improvement, And is I as call.

Beyond give specific tough will be that, details. it to

wanted Okay. about to to more Any ask But when could A push in I normalized just it that? there And little Thank XH had XXXX normalizing. a is update on talk about you. think get previously, was we talked it loss you rate. that being into XXXX losses later. maybe then even

Yes.

on improved normalization help portfolio frankly, little determine So normalization is through the upper drive the surprise a the whether the performance expected, we’re it environment the pace helped slower us we that than will we of guidance rate. gave into is on and pleased only the and charge-off the XXXX end XXXX which But macro today, sitting we’re very pushes where XXXX. with

Thank you.

Thank you.

Our will come with Shane from JPMorgan. question next Rick

open. now is line Your

taking that great be categories cause something you’re at there’s if with spending of on you’re the for more population. pressures. But a their Look, category for where are I’m are that’s about? we cards inflationary customer a seeing everyone the pump for should asking that the signals people a use Thanks your level obvious thinking my represents that people curious concern, when are seeing spending there domestic you anything is look of question. really basis, base sample not

Great Yes. question.

in base continued seeing we’re our does upwards, more prime, in probably little in but skew So October. so the a strength sales

say, in I’d So, low year-over-year teens. the

the about of picking Some trends you’ve heard were up.

inflation. saw durables softening we’ll our by to the But downgrade I they some consumer households, So we’ll is terms absorb the category. of of a categories, the switch say off again, causes large, and coming growth would year-over-year. in very over It travel But strong pain, and we some very, within liquidity summer. have

in the and trend. strength are consumer travel less little So key durables a probably

much. Got it. Thank you very

Thank you.

from with next Wolfe Carcache Our come will Research. question Bill

line Your now open. is

morning, Good Roger Thank and John. you.

morning. Good

but my conditions expect are to have slowing the Fed is now. the rate, late growth And exceptionally accelerating, your whole already unemployment change you’d hiking strong ended industry you share any in I’ll reserve the strong what Can layer typically thoughts and cycle mentioned helpful? be historically. give certainly, of with commentary late mean And is how implicit You growth. enjoying for that seems expansion unemployment around growth, expansion follow-up in operating in in cycle consistent be loan to reserve any rate you a you’re around what that end? very level loan and would if would can cycles just

Yes.

great So question.

late couple of mean, think we that in I terms I being I talked of about So, late cycle, and it no ended cycle expected. back pre-pandemic, a for then it one think a years, way in

our look credit And be through-the-cycle to so why disciplined to rate in we that’s part use management. loss of and a tend

credit. time So not widening a while would probably I to be, be it’s

is We’re on the seeing while and in account personal side, growth the in that some again, we for benefits I cycle. it investments builds as of of growth the think swapping around different a in where and the product with XXXX And loan And mature. a really strong late and those lot swapping the in accounts policy populations. advanced the out production on appropriate from we’re card new particular, achieving analytics, had

actions as pass I’ll well products originations John credit just two. And traction the we across it, part but it account again, approach to of our the in getting for are about So good look all to in as and continue our we’ll both portfolio the new marketplace. of products, terms at our feel

kind and in of of kind of assumptions terms fundamental reserve for Hey, Yes. Bill setting.

So, a as scenario we as well wide pretty the recessionary right? scenario. didn’t X% scenarios, we of modeled. in now, of scenario The X%. I scenario I’ll used The said there’s some as earlier, forecasted as unemployment the of rate, right in range a number is more of non-recession recessionary which optimistic north So dark as a We going included also what non-recession much wait very, view and scenario. the certainly say, terms the that kind different

big range at deep indication driver, recessionary be more X%, not we’re scenarios an contraction. in and but would we a of weighted GDP, in looked mild as towards it and complete so scenario; economy. at not XXXX a increasing And about Today, with the contraction, unemployment. stability there certainly a for

overall, there we think, tougher macro. So a will be stability general despite

you. Thank

Thank you.

Our next question comes from Kevin Barker with Piper Sandler.

line Your is now open.

unemployment or or you stress, or books? are indicate patterns in vintages customers that certain on some it’s That underwriting. are concerning may consumer that lower regarding you seeing your prime other spending said, even minor certain shifts the whether the any of payment slight pockets parts of end maybe of comments on tightening maybe being Thank rate,

Yes. are well. I all mean performing the vintages

normalized close I the occur said, think faster end prime. pretty we’re the fully of As normalization for John seeing to lower and

While bit XXXX the basis come and softened basis remains points, higher about XX than payment points has by a XXX levels. rate it down

jobs, to speaks employment there’s I that strong can market hours. still very people so the can out And think that find there, fact find extra

liquidity so amount segment. good for the deferred our And supporting is of a that

here a as student something Obviously, January? know with fluid And any student a as headwind lot payments. next positive, Okay. credit to but is in student impact the supposed the fighting do here potential happening given there there’s repayments expect debt restart but the what’s is then could debt obviously you or but to of that incremental the early forgiveness potentially who in see credit restart courts, you maybe with I debt it’s a is repayment a year situation, knows,

don’t loan that their we significant closely. I private it more dampening of I think a elevated have on see impact rate, experienced have as students student has growth payments watched We’ve impact put mean anything which a have necessarily. would on we loans. towards credit. Not their But payment an

thank for my taking questions. Okay, you

Thank you.

will from question Barclays. come next Our Mark DeVries with

Your line is now open.

Thanks. Yes. we revenue see softens we weakness economy think start and manage the about discipline, expense to should credit if How here? some if you how

a we’ll be of and spending front we decisions simply us, opportunities will have in just long-term going for decisions. very would employment mindful to great we’re will And take shareholders. discretionary our around at be very, around we and the look I say Yes. that make what hope I

hope of the good we company. stewards we’re So overall,

trended basis for And to this is you cost points that Okay. Got year has Maybe it then quarter. X% relatively think quarter assume of said Is so categories just got to far X% I this the X%. more in it but the rewards expenses? the X where it. guidance big was right given you’ve guidance a XQ is

we previously point assume that’s said range, within and the what two necessarily within still wouldn’t I had to four the and between Yes. the guidance wanted is it what range. of keep that we the

to X% to and managed we’ve an to, is seen that to that X% we’ll So do something extent, continue that. historically, and

be fourth I lean any particular high to the is low. or assume on information quarter to So wouldn’t extraordinarily going

Okay, got you. Thank it.

you. Thank

Our next Partners. Ryan with Bill will Seaport come question Research from

Your line is now open.

couple Good of Thanks. questions. morning and quick a

personal directly. paying you up changed wondering following on I’d creditors checks I anything strong the on if the very, business. Just heavily Has there well? that case. just was Historically, loans off business, also focused as And credit very still credit been card your base. that’s it’s say, had, And in

No.

analytics been balanced has pretty base underwriting continued broad advancement just in market. conservative. there the but and it’s terms to very, change say card would I the the of approach Probably cross-hold the very in versus biggest So,

verification, the thanks opposed lot But one sure can very employment again, I get get we performance you it in that the et go, of of because manage to remains strong manual as credit shot as right lot business heavily it there just a disciplined make approach. cetera, loans. card a to So and say you personal to you processes very, would it’s that where

percentage promotional and the the kind card Or up portfolio? of to that’s still of brought on maybe it give it stands stabilized card kind Okay. of last And us the follow-up book just overall where it perspective Is one history? historical the quarters. several a on of balances, been is recent Thanks. for some increasing as

the stabilized been approach very it second stabilization into it’s Thanks. third Yes. the It’s quarter where in historically. close basically to has quarter, and

questions. my taking for thanks Okay,

You’re welcome.

Thank you.

Our next with Gabriele Dominick question from Oppenheimer. will come

Your line is now open.

change can But just my laid a have provide to businesses a, your Thank of much across slowing maybe, various economy. And so you holistic the thanks in particular throughout and kind playbook I idea you. then Throughout of in with call for a what pieces discover economic follow-up. the calls, out environment? for us Hey, more the other of questions. tougher of and you’ve on a Roger, protect profitability just side taking credit would pieces

just on protecting this out the I’ve to what And usually in most a marketing a on long-term out basis. in who value by quarter-by-quarter delivering be some the Yes. of of been saying while, as focus profitability totally We on I’d start a we necessarily vintages. don’t optimize on miss to think got profitable I business people sort downturn, turn shareholders.

momentum because to be be expenses, around to in do would think on that And the us company so ability again. recession, box, people do, conserved try cut through that But and or items. you always on our in we’re tighten always we cycles, But previous can credit as more really too. you mainly credit we a are yes, tied you and marketing there market, I keep fewer there’s was especially a distinguished almost discretionary like operate and downturn try has

guys. your credit portfolio. credit be are of think both helpful what And you. views loans? guidance, so to basis the – versus cards movement the reason huge be difference normalization normalization card Consensus for loan for portfolio on any versus – the in personal point much specific Thanks it’d really a faster has such on side the XXXX card on side net Thank Great. as far and of why there as loan there not I loan understand credit percentage versus Okay. the such your ramp as but personal would looking charge-offs a a of personal is

I’m that why But FICO than card loans, little a I we portfolio haven’t that the than recession. say tend to volatile wouldn’t Yes. general, But sure be I more faster would expect. They out a In higher loans – have isn’t do business. card the necessarily personal behavior would in book. I underwrite personal given mean guidance. the product-by-product not much we put I jump we our how would a for

much. so Thanks Great.

We’ll Katie. here speaking a thank there’s thank Thanks, looking the be have Well, IR any us. you out follow-ups, joining to day. to everyone right. forward for All if And with And please you, reach great team. and additional and you.

Thank you.

this event. and concludes gentlemen, Ladies Thank today’s you.

may disconnect. You now