Discover Financial Services (DFS) 19 Jan 232022 Q4 Earnings call transcript

Good morning. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fourth Quarter and Full Year 2022 Discover Financial Services Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. you. Thank Instructions] [Operator

turn Investor over Relations. now Wasserstrom, Mr. Head of Please the will to call Eric I go ahead.

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

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

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

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

pleasure it's the And my over with to to Roger. turn that, call

for begin quarter key call. the you thanks our Eric, today's John will fourth details I our through and XXXX. on perspectives highlights and joining the take the to listeners of want metrics and reviewing then our Thanks, to results year, and for by

net accomplished solid XXXX us fluid want significant unusual and beyond. going a macroeconomic or in fourth execution. and was was momentum gives I'm policy for year of earnings strongest that We against $X.X the to thank billion I into year. our backdrop entire and monetary income quarter share $X.XX billion reported very This This company's per XXXX the and $X per the Discover full and for for share history. the pleased say to second team performance for $XX.XX or their

give underscore highlights that these to strong results. want few a I

in accounts to loan appeal our consumer XX%. approach by maintaining conservative our new demonstrates advancements targeting underwriting value consumer receivables grew management. and the by proposition acquisition and while and and we capabilities First, of our This XX% credit

ratio. while a our of on brand disciplined The servicing acquisition this investing underscores contributed highly for build-out the model. business and XX% of and return increasing our field achieving and capabilities growth, past XX% the personnel to marketing, including continuing of data prudently year combination for collections, capital-generative expansion and equity revenue an also both all nature and management analytic We're efficiency cost and our

Over the we increased $X.X the expect we dividend course of repurchased to in levels billion return future. stock XXXX, attractive of sustain XX%, over shareholders common capital into and to our and by our

our As we of a we level backdrop. into we an macroeconomic favorable appropriate investment expect organization. less in XXXX, look to maintain Nevertheless, intend

initiatives For we digital mass with market consistent will example, have market for continue we'll our in broad our manner acquisition to and brand debit invest in in we several a course, account that And environment. improve marketing anticipate product. and cash-back of the launch capabilities, the

climate of in conditions, aware we which will adjust. operating. we there in very And economic We're are should the be changes

leading consumer Our reserves lending through-the-cycle model combined of underpin being with earnings digital and factors, historically the resilient bank. cycle. capital, our has the our with These its through focus returns prime supported and power, economic strategy underwriting on

in the our turn now more review I'll to call to John results over detail.

growth growth-based Thank provisioning. good of expansion, with largely takeaway the summary quarter and The I'll margin financial results strong Slide about on by offset everyone. you, partially start Roger, our X. asset is net morning, and interest

revenue Asset sequentially X% growth XX% NIM combined a increased and with year-over-year. rate improvement,

year, In the our growth has increase million prior drove also of last increase in ratio $XX relatively million. flat released reserves at an to of quarter, This X.X%. reserve asset we reserves. coverage Similar our $XXX

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

X. $XXX million Let's year-over-year Slide was income interest on the XX%. Net review details or up starting

costs prime balances. basis points and higher the at XX the from benefiting NIM and the expanded, XX.XX%, year up sequentially. higher ended margin from basis funding interest increased prior XX partially promotional points by net Our rate quarter offset

XX.XX%, payment rate the in XX% Sales For deceleration growth and in continued first by prior sales, experienced moderation. the and period, increased XX% was XX% full which NIM prior the year-over-year, year. basis growth card account Receivable strong up year, increased new a the year. we in the growth XX points reflecting the was X% the from quarter of driven from the half

the the was accounts the payment from quarter. by Similar last a year's mitigated the decrease which sales card prior grew XX% rate, fell basis decline points by quarter. quarter, in New to fourth in growth XXX

decline to to more continue a moderate at We pace. payment expect through XXXX, but rates

non-card as X% were Turning peak products. loans XX%. of result originations. increased to our a up Organic season student Personal loans

disciplined stay and approach pricing to product. of underwriting marketing, this our in continue We to

attractive proposition market well us that strong consumer experiencing Our in value conditions. some positioned in and competitive is demand has improvement the

be mix, changes. deposit customer year-over-year pricing a to in in pricing expected what of up moderation In environment. of we pace funding and in Recently, terms rising with Deposit line have our some balances continues were rate the sequentially. seen we X% XX%

on partially driven for our $XXX non-interest Non-interest primarily on income loss our million loss increased was to items. XX%. XX%. $XXX equity investments two due to a was $X up these, revenue million income this year increase quarter. or at compared the This a Looking Slide other quarter, in million X. by Adjusting This prior was

and was second, strong and $XX a reflecting which income by million was And million $XX X% had sales discount fee net up favorable we loan or rewards XX%, offset mix, driven sales costs. or First, interchange volume. higher revenue, partially up higher by

Marketing operating $XXX up from costs were quarter. the increased Compensation consumer prior banking in card Total and inflation. on up in $XX X% increased to up XX% we invest expenses primarily headcount products. for our and expenses due year-over-year or prudently wage were expenses continue to million XX% Moving growth to X. million or Slide as

to equipment locations, servicing footprint and to prior equipment quarter. year location. recent Adjusting action, and the Phoenix exited to for a our we have center of call this to three flat onetime related of we'll was our four and expense Premise continue this going this, With elevated due resized or been have forward. premise our major the evaluate quarter write-off exit would

on to the X.XX%, the quarter. Total was X.XX% points basis basis points higher performance net XX from the X. up prior XX points sequentially. Moving the basis basis charge-offs and points rate year than the year higher card prior higher of credit In Slide prior charge-off were XX and net portfolio, XX than

to our normalizing, past bands, of vintages older largely are low risk tolerances As and cover credit consistent approach seasoning expected, management. of Among mild years, within These robust trends and our our rates portfolio from moment. normalization evidence XXXX with two in underwriting deterioration a we and stress market. historical inflation-driven. I'll see segment, broader credit loss prime core labor new view our the reflecting are account of given the revolver and vintages expected don't are

X. the on allowance Slide of discussions Turning our to

This quarter, we our driven $XXX by receivable increased in million allowance the increase by balances.

Our for the reserve transactor have fourth Adjusting the rate declined level in slightly rate flat. would reserve quarter, elevated to been X.X%. our balances sequentially of near

Under and accordingly. our required the adjust we contemplate losses of life loan to CECL reserve levels are accounting standard,

employment to our conditions For risk pose most significant us, forecast. changes the the to

unemployment was and scenarios the baseline with For assumption X%. X.X% our alternative reserve, XXXX and in above year-end XXXX between X.X%

XX. Slide at Looking

Tier period common Our X the for was XX.X%. equity

remains Our longer-term target XX.X%. at

And We four XXXX, common share. quarterly of Yesterday, the we next target announced dividend to six expect a quarters. to fourth make $XXX common repurchased the $X.XX progress against quarter over million stock. we per in of this of

Slide growth XX which Concluding and leverage. should is Momentum on double-digit generate with positive outlook. operating revenue our strong, help to

by trends. be to the growth is in payment driven volume and with loan rate end-of-period accounts somewhat year in expect in growth new We prior double low factors: growth sales average moderation three our loan higher. This the digits

up we expect the the deceleration over Through mid-January, the high single of year. to digits sales course but are XX%,

expect to decline More quarter than half be interest and driven benefits to We in loan levels. in half. by the the be fourth first the XXXX the expect year second modestly specifically, levels continued full net above NIM of year re-pricing we margin the higher

expenses We XX%. less for operating are increase looking total to than

of increase in Salary expense to second hiring half XXXX. and will benefit the due

be marketing expect full above level. our we XXXX year to Additionally,

We case, high with X.X% in employment weaker the end for expect low average the will more consistent of end net between is a more base line scenario. is X.X% year. and The with the our while full charge-offs range

of this year. capacity of we in under $X.X $X.X remaining the billion Lastly, billion that June expires have share program repurchase

recommendations repurchase expect on of update We around to shares first share future Board. we review our half complete $X.X in after with provide We'll testing the and billion of process authorizations an our stress repurchase XXXX.

and conservative funding in receivable our growth positive sales. NIM continued management. payment increases new to In with rate prime expectations to and from costs summary, underwriting from credit account rate approach through-the-cycle consistent process with line acquisition, performing continues and benefit moderation with is credit benefit

and perspective generating capital advancing for our our in XXXX reflect strategic returns management. while disciplined on remaining credit our priorities Our focus and expense high

call turn our the Q&A. to that, With for back the open I'll line operator over to

[Operator question take Moshe Orenbuch with Credit our Instructions] Suisse. from We'll first

thanks could kind a getting past Great. to that's that X.X% what too And along that's know at has or would or Like low? whether But you about of credit for bit not talk points parameters too John, of here happen, what base is either that of kind outlining bad expected good. to loss. the way, of range X.X%? happen And to you the high the little from the case

for Thanks Moshe. Yes. Great. Yes. the question,

outcomes certainly we as right? significantly a X.X% historical which Post through of a the for in anticipate X.X% deal roll expect the we of models have our through unlocked, projection half first methodology. rate second of what been used possible use of some is months, range a the great of the so six data And -- but to happen. to visibility 'XX. analytical the year months number to So a make that's different we year, tested six

see two the we with it in rates is be get roll through our reserve. with consistent of base to expectations roll the on able the one first and the our a bucket, as terms bucket happening what's on we'll case to quarter, roll So to

happening some the levels overall environment That Beyond certainly at with and perspective. us that, will what's job market. the we'll unemployment macro look and give

there important and of know I an we're the 'XX where step-up in And then this, to where questions from projecting component terms some ended was we of 'XX.

significant right have vintages are now. process going seasoning the We normal fairly that through

our year So this last XX/XX so portfolio, end-of-period card to increased $XX.X by for billion. year XX/XX example,

credit to maturity card, think a you peak first within years, kind of a of year if two And typically losses. cycle you the hit about

that So that provided. then losses half little returning perhaps this 'XX year, bend with the a bit second in expect we curve of coming some expecting in top We we're of and in the environment, macroeconomic the and see a that of stable down here, slope we've is down. therefore, should do what guidance begin to the through

'XX and that seeing So seasoning that overall, portfolio very then, total significant strong within what completely expectation we're we'll at here see just levels that are are a that the 'XX our And portfolio, through came -- overall is thresholds. vintages were of normalized. return in

provides clarity what that as hopefully, trajectory seeing as well in on both the So the some portfolio. we're

Perfect. rate reserve just was follow-up, as And a down. the

that, result with You mentioned that I But was it balances. even a wasn't of up. largely guess transactor

when well? if about you're certainly keeping so through like how And that feel mean, of how flat. think about we doesn't I than a you should you're your that, it reserve -- do think worse you environment do think anticipating how no as -- 'XX And kind going we deteriorating

question. in And cover set. them happy same to great connected, Yes, so they're the

of outcomes. and within CECL the And forward. had macroeconomic any we changes so, drives that performing as right? know, macroeconomic -- the haven't losses of environment. loan life and portfolio essentially, view performance the we is So what And expected environment substantial our our of today is the to going And all ranges portfolio the reflects

you third of quarter. the a the taking and ton fourth we essentially the would in without at the receivable arrive the levels be look consistent macro, how what most we with that weeks and we detail did a teams reserve quarter performance, balances through as through, portfolio So, felt at aggregate, And spend appropriate that's weeks fairly working answer. we essentially, stable the in

Thank you.

next from question KBW. will Sakhrani come with Our Sanjay

will is decelerates, just just you how make slope impact question mentioned apart I parse about of but of sort Moshe the said the seasoning delinquencies the versus Is I the Does next still you sort curve a years. second sure way in just to for John, a the degradation the actual in your you range think understand it base follow-up the talked result And half, of want two there any to of first on you to of then question seasoning asked. to credit deteriorating the weigh Maybe impact on case? as the seasoning. half a in XXXX? us of the in the

Yes.

the and the in you portfolio card of anchor out I in billion $XX.X explicitly of for about in out called of losses on give listening the terms that our to after here, happens so terms folks vintages, the can are in typically terms vintage the XXXX, significant a to in thinking So impact place vintage what vintage of then a run and stable macro. a peak the

least the you in vintage. in help terms the terms at should thinking of that So of

about think of range we on base year, to As this gave that -- loan on loan we X.X% average the the X.X% base.

range should first about on here. think you depend of It the So will ultimate the kind macro.

only in this what not will stable in continue vintage the mature pending, we'll of give to actually then, should slightly. the we And see updates macro, expect seeing. terms of quarters slope curve XXXX. inverting Second, ultimately, in in but each a we're But we

question in seasoning, but here? a Because tougher face driving of past, you you are mentioned What guys I guys know looking a still comfortable What economic loan investors. in question speaking on quite the backdrop. different grow takes Maybe on double-digit you the makes a that that's growth. to every strong the are comfort you I growth Follow-up complexion. Okay. here? Roger, to and maybe cycle at get Obviously, gives you bit from expecting growth the the growth a the

Good Sanjay. Yes. question,

you seen as per during the cycles you disciplined put as extraordinarily can operate we in through I that see a the time, and and And take us as on business back. cost think you've challenging perform frequently, this in competitors multiple good pull very accounts bad. economic good both times well, well approach account

the great adjust marketing conditions, returns we as that we're economic look continue putting year, accounts expect new well So, back to portfolio. and out both Nevertheless, we to in the have of credit half on been and tightening last standards, the you to seeing pretty started starting there. clear us that as according can for at we're investments

what that's so, investing And in gives the keep to confidence us growth.

Thank you.

John with comes Hecht Jefferies. next question from Our

assumptions. the Not think the the to credit. and one the kind dead the detailed provisioning on unemployment beat John, of you more horse, of maybe but just question I kind

to I middle X% they maybe of think kind of were kind the making X.X% with in the range range, X% of the the somewhere fairway.

moves the charge-offs the the say basis you sensitivity for than -- the Just to XXX tell higher ALL maybe what's can at us points or either unemployment level like that.

Yes.

of case unemployment. XXX primary we here, a in kind points basis So our assumed increase in

Now specific that that was to our charge-off forecast.

multiple kind scenario of of we a The levels, In X.X% weighted all terms to reserve loss of actually up X%. used then way going a the heavily composite of and reflected more scenarios. rate

macro that, I we in service terms middle life kind that environment have our in to change So, sensitivity. of I'm unemployment the that the seeing our that we're and down of on in actually quantum of terms of like here indicate reserve up which changed, that overall if creep feeling on perspectives has of we're appropriateness more could view losses. of specificity that terms a change be don't levels in would of think loan sort matter sort would or and given

the Okay. That's yield down are then and the of with elevated the of guidance annual part that sounds the helpful. and year gave respect with to of maybe like what it cost coming NIM you And drivers in the NIM, second, capital? first an

Yes. Yes.

through the drivers. primary So I'm going run to

changes So XXXX. first as we've as second in two would either half three 'XX be increases anticipated in what or of the well Fed rate the

consumer our products. pricing has on took third with Second some been then, environment. increase actions improving piece And the we banking impact is rate in the the which investments, the the is yield in

So, think non-card products. the about

So the be of of kind cost offsetting would that funding.

an external XXXX. then which high from stepping confidence increased. we're in of and peak a to costs of then the DTC going credit, have those down net also So And funding through anticipating and quarter from level first us certainly, we're NIM that there impact all see the of gives

Thank you.

Our from DeVries Barclays. next with question comes Mark

question I charge-off commentary know the more of XXXX. the at X.X%. you. one at more and credit rate give to to imply just some than clarify you XXXX but think for to the don't have some around generally you out, year implications I it I I out at one a charge-off has guidance you guidance if seems wanted mean I try range, kind of look guidance X% exit for

north that's I think, is kind of rate implying a John, charge-off Should we for of you indicated is X% peak to assume XXXX of a that XXXX? -- year? reasonable it expect kind

Yes.

So you about will the slope X.X%. a curve what to think that. and the curve happen XXXX X.X% your for talked of were right We call and we gave I of on the range to here.

Mark, as to I'm think prudence, that's as going here. I go a So, probably matter of as far

Okay. enough. Fair color. for Thanks that

you. Thank

comes Our Stanley. Morgan with next Graseck from question Betsy

is way the your address have on net be vintages helpful different that that give what a color months slightly rates seasoning in perhaps kind path us a seen this Maybe and of of could to you understand. to question peak fully of around in happens some within would charge-off terms month where seasoned range you

Yes.

So see varies credit it XX And on typically, quality. we'll months. around based it

credit the quality. highest So,

And say, peak think, think little typically about the But bit weaker, I So, months earlier. I'll the XX I typically weaker peak on FICO average, later. would little a a credits or then so.

maybe it would vintage that to you seeing, helpful you're the been if in of want could what would XXXX XXXX, you understand how terms historically, you've in trajecting And that there write level be helpful? to the are comp And be to vintages peak. seeing

Yes.

answer first So would vintage. that the on would of be the it depend part --

kind were and we concentrated So prime and season locked there's level the a and our go loss peak upper to We back below right, will historically vintage on down. you what at vintage prime Discover prime underwriting has done. that ceased near if remember, of COVID, lower XXXX

If information level can look get essentially comfort vintage. underwriting be that 'XX, some an consistent what were you standard at can to with expected 'XX, of 'XX this you And to on we in back use history. around

a more pre-COVID Okay. normal -- Because type saying exhibiting is is is 'XX vintages? normal basically behavior that you're of

what normalizing. It normalizing. is. codify of We've you're an we're the the in entire Yes. essentially beginning the to the right? portfolio here normalizing. portfolio talked is that year consistently one coming the actually, base, portfolio is that So since And off in Yes. think The their seeing we about low for important is I thought is that minds last XXXX difference abnormally that guidance was folks

consistent The reserve is losses normalization peak ratio level current in with hit this whereby 'XX?

Otherwise, controller have would exception reserve my Yes. taken to an our process.

is and this And this we're -- personnel? student I is but expectation other the card, know as classes of the same well, kind across talking about asset Right.

Yes.

overcorrected Although what is, personal the terms rate that we is loans below on to perhaps again, norms. had in historical we terms the back of we're talked that loss in rates significantly. seeing product normalize. about We beginning pullback. Payment And of underwriting, in fact pulled

So the about of that some there. very, I confident we're seasoning product. again, loss expect very and But normalization performance

understand for priorities payment folks. the We on it where is

mindful full high student we're bit of we'll economy cosigners. XX-plus be little the and standard. have programs yes, underwritten when loans, likely government So the impact have We of percent the we to on see a back have the student having that's of going on to to it's pay impact did normalizing. debtors but that. And loans, a

comfortable that So, we about as product well. very feel

Thank you.

Our next Shane Rick from of question JPMorgan. comes

then your is and think reserve It the and where milestone interesting points. I'm you you points made like-for-like basis each allowance? CECL those economic reserve one on XXX same and we time, build an a when Or CECL curious you in of your basically CECL how day you is XX points. about versus outlook basis compare one basis, compare would please? a economic outlooks apples-to-apples in this adjustments have to seasonality build where up is rate day Look, the

Yes.

question, good Rick. So

unemployment They've first folks, one with day standard we levels. macros but were out. one I'd models. And higher new rolled past, like CECL extensively. been this to referenced the we've time using was So late in cycle the day We new tested were remind

as as terms X.XX where total how in look kind based macros loss we at seeing or That the kind of reserve in So performing. right, the appropriate we're what of seems the quarter, are of portfolio fourth and is we rate. today of on

it the a So, do day X, we one that on of was decision point January use whatsoever. but as to specifically from today, is where don't only we back standpoint reference XXXX, where it

think refine everybody you more assumptions have are do think and as think curious that, the that understood. you've that. described that basis, the them lower a you evolved. one? models that What like rates if I'm fair, I versus CECL would John like-for-like reserve I'm day you on were is, -- asking same appreciates using that's And today I

Yes. are you a extraordinarily product. the not We're in well. at No, type X.X% in and We're expect minimum And seasoning unemployment at bit a no, performed least seeing performance. contemplating as lower. this the now, of more they're would increase looking portfolio macros of of likely of X%. It's level

those macros. So what that the is reflects you're quarter reserve a CECL seeing for here

Thank you.

Our with next comes Bob William question from Blair. Napoli

competition, on more Many Roger, strong aggressive, mean, for environment are commentary, seeing players more seeing of of including -- I if -- you've you yourselves. out are competition? competitive very more Where industry, a you people Can number the you in growth getting some you would? more seen rewards. the

would Yes. the give to our us I seen advancements new personalize remains, And to that credit as sort the value and again, growth the performance Thanks well. across intensely accounts, proposition of you've But channels. I messages different say, want It from some analytics especially the the of in Bob. competitive. competing on marketing is let

lightened has competition bit where guess is space. a the personal in I loan

have some obviously, out. may And balance other on who lot of think there funded I challenges are active sheet. is there big one side non-bank folks been pulling player a the of the who had

now a wide It's the there, deposit direct On money. lot you're see think seeing a between X.X% at worth enough rate. It's to direct to system, starting side, the the really your gap banks, get more now the banks flows right? that savings the for I see would I branch you're

products about excited how competing every across So really segment. again, our are

And going of we're so that's part optimistic into XXXX. why

I products, new that talked new about? your you've What cash-back mean What are excited most products you debit something about? is

highlighting You're doing will be some advertising for to the year, big we mass-market cash-back debit next hope the of re-launch launch and of probably be which that.

we great We're lack Beyond example, the demand, on how right cash-out moved seeing have given set. for and product the equity refi. that, believe of really home have side, I the rates

So very are, I think keep as part simple, as a we how costs is our operating of model. lean low they

I the So wouldn't that. of behind expect cash-back weight and anything we'll other than debit of the re-launch a lot put

you. Thank

ISI. next Our John comes Evercore question from with Pancari

Back well anything like to guidance know charge-off sounds I'm charge-off anything I the to your you're vintages, the in there's nothing wondering, in the that and in of all behavior within surprise a increase led The to that guidance, that that surprised the where credit the Street that topic, surprised you about the that what dues vintages the credit you. about observing. you about terms customer the it there baked expecting? and/or But the seasoning into and guidance really be at migration within talked above portfolio past was the seems is

reiterate is connected. So, Yes. whatsoever, I flat, and rate And are that. in want Thanks, no performance portfolio the why essentially Actually, that's the surprises John. reserve to right? they

essentially of was losses. charge-off is in says So what life loan that the of reserving guidance that contemplated

credit in that in about very have the prepared that So, of did my about feel our portfolio. the end we I lowest there we is remarks good spectrum and talk that consistency.

we fell some impact on the members, would do inflation performing analysis to near-prime and feeling it without it scores those some we what anticipated we certainly had where internally, shocks folks it's the XXX are of FICO thought below essentially completely But who and from some out. and inflation. would card run some or So that come

that. I'm quite actually So pleased about

of audience on The that questions the think consistent to charge-off the these historically. earnings from focus increased other And what I did for we've power good of of us that I thing the the sure assets firm. peak want XXXX a it with is lot kind there's here what is done and make important

billion. $XX loans So increased

great but a So, there's power teams. of has going result to our overall, as increased seasoning, be firm earnings the some by of the execution

this just progresses just then, -- the given the as if into and migration progresses But CECL And macro you again, described reserve it. scenarios of commentary indicated spirit your know helpful. That's whole and here and I outlook that Okay. the expect gets scenario elsewhere, you would your accordingly this XXXX within the there that incremental the remains no in level reserve, reserve you upside and of vintage, they're the generally remain as that at case? other assuming XXXX surprises to then within that would backdrop flat, so macro that could be around XXX Or loss to bands.

Yes.

are but So, the question. I the out, expect A laid lot they there, rates appreciate of there's -- you assumptions would to overall where close today. reserve in I as be relatively to of kind

Thank you.

Bill from comes question with Carcache Research. Wolfe next Our

of ask expect on you'd to kind sense give X.X% outlook? to that us a you rate delinquency if wanted what of First, could based NCR rates I X.X%

we Yes. typically the I mean rates. don't delinquency forecast

trust You insights. you total then take spend. also, company relative where perhaps do what slope point. is coming right? pretty will and a the flatten -- that the trends typically to suggest can in starting would then views trust we to the historically out, some give And some difference go terms the And between see where data point You I and delinquencies consistent, point of to in at then and the data given are is I've look the

rates overall firm. if you're use I'd in -- in that to delinquency calculating order interested So, for information

charge-offs. expecting breakdown spirit a to unique the delinquencies start in to charge-offs, to the other In increase delinquencies it increase between that expect words, I helpful. -- a would between of historical just through? of delinquencies anything come the the was, charge-offs sharp sharp commensurate That's sorry, relationship and lead in the guess happening be sort there you're data question Okay. isn't that exists increase with in or would that reasonable in as that

Yes, relationship certainly. there, there obviously, a

billion and seasoning, remember, say incremental of Although there's should account vintage the into should impact -- $XX take of I'll the right? normal what have kind you you loans. So,

and Some to out of perform will as small percentage see. well just season, are extremely typically we going those a

at consider break. analysis, no be would I that in So, substantial nothing but should the it. There

might Okay. flow the increase that what be stage did off? rates early stage follow-up higher NCOs? this, was have initial it delinquency this So delinquencies to buckets and charging in why And that thought was is, have my my missed if this there but Is credit a Just through zero quarter. increase I how various clarification quarter before an would delinquencies card impacted great. following early-stage would early drive

a of is different buckets. And there's -- element. through Well, just there's couple a also the Yes. a bankruptcy that non-bankruptcy there's then There's components, Yes. recovery flows bucket the bucket. There right?

you put sometimes depending those and the of in court particular three the in a if it quarter, will the on bankruptcy non-bankruptcy system work quarter-over-quarter. flow flows just is So together, pop bucket

this the for. certainly looking out in comes look So, would I you're at first that quarter, what prior quarter, insights the and will quarter be and

Thank you.

next with America. Bhatia question Our comes from Mihir Bank of

little about I talk wanted to bit more credit. just a

increases, just think little said we at deterioration with contemplate I understand I differently, credit you deterioration we've guess bands. what lower think revolver in seasoning that is normalization overall? for stress been that is, Does formalization to it credit to all as vintage your bit talking core go guidance just I'm DFS So Or about? trying unemployment of in mentioned do from the impacts the mild specifically, you portfolio among a your prime

we're is obviously and normalization strategy, providing. we origination and strategy in It's fully our seasoning, guidance which in kind Thank of latter. the It reserving our contemplated Yes. both you. the

the of pattern. Yes. the to prime that large, readjust down, can pressure maybe are segments adjust. And additional small which a portion a and inflation, right? their lowest are trade our get book pretty By They from income just ones base they clarify,

incremental So there. to the no to believe charge-offs stress that is of referring portfolio driven is sorry, the traditional John I drivers losses, think there's will unemployment. majority which -- vast which by was be But I'm reason our of

picture maybe just to little of Got then, it. question, bit longer I a And big want did offer term. a

and past and obviously into the I business some long lot earnings it a where seasoning. like But a think changed of has is that bit appreciate increase assets guidance will even added losses lot potentially the portfolio next running. you of have and power and sounds last a been little we time credit these your because year for have 'XX above a the --

for So or Maybe the loss maybe portfolio like us the just something or what a DFS remind for that? range. card normal give us, rate is

a trying that settle it does out? to Is typical understand Just where that up? X% X%, portfolio where low settles range in

Thanks, Yes. Mihir.

adjustments kind through So economic the discern back and can make question of kind see then typically many quarter-over-quarter on rate or for seasoning. refer look charge-off go I charge-off asked of many, what is, the of back kind what's -- front, years details if a the of times. history, And people charge-off from take we've that you the at periods over the XXXX. been happening kind to you And of normalized you can vintage-based that

Thank you.

Sandler. Our Barker with next question comes Piper Kevin from

X% And help a the unemployment assumes confirm low there X% in your just and employment of your implying some X.X% the that or the -- range, within X.X% it rate scenario us expectations? But your rate. other end the the to pretty X.X% or you regards out unemployment base end, you're higher the that is understand forecast to can assumptions, clear

Yes.

the does X%, So of unemployment it actually weight reflect X% kind depth not could higher entirely. depend the than the what on a end and It with of industry. it scenario is but actually the high would

So, there's in multiple there. scenarios

of contemplated of meat So, the kind scenarios intended get the and terms the or provided that guidance is I over in kind the were X.X% X% of to weighted. of

that with then drift throughout and the assumption Okay. to you expected then startly and to baseline of we X.X% is And something level peak there our where way maintain that then year or make lower? something that X%, your to

Yes.

thought through run XXXX increase through about how slowly and it. we've would it So

Thank you.

Our next Fargo. question comes Wells from Don Fandetti with

changes. Can and you kind of of dig in on any a growth spend bit the in more rate terms you're what credit seeing little card pattern

I a think a you touched you I And on think in November last maybe update the through showed January? can December bit and little of growth talk step-down rate. about the

Yes. I'll start. to a off strong very start. is January

and new on year, we also, environment. So, accounts robust who again, employed for year-over-year a in reflects growth we're put a seeing about those sales, XX% aren't last again, the but

spending inflation so commensurate increases have the in day-to-day shifting We been and more there. seeing with category

think, and goods, what to challenging from you heard hard lot of lot around improvement, really a And I the from robust of but retailers comparisons in home softness some terms of before. of just, was levels a that

So, by overall, far in certainly January. so encouraged we're but I'd seeing say, stable, we're what

you. Thank

question comes Our next Citi. from Arren Cyganovich with

On of the the than there strong What's to a process a thought indicated in acquisition strong spend you. outlook, after obviously you had was for such marketing levels, very year? XXXX expecting that terms increase to you expect year more spend which

and I'm and on an you And marketing question. talk kind overview kind to about going great thinking expenses specifically of Yes, of hit I'll what, now know give our there.

overall said than we expenses would increase XX%. So, less

the is a and in single for marketing that what spend. double-digit contemplates So, non-marketing increase digits

we to acquire that new are is, with reflects see accounts do. profitable to consistent continue we opportunities that what what And

So in that -- revolver that credit card. prime

checking intending the spend the on are some to product. also of money debit launch We

awareness product. So dollars for well as as that include accounts bring the to new advertising will to

to. the effectiveness what gave it's that of the less in guidance. targeting have we've of be or But increase in could of it continue the level and our -- view and our what's of than change this environment wisely overall, then, If terms the to ample the we with pleased And we very, we and of marketing important guided very spend we're see money to to confidence to kind that. us spend, is calls make macroeconomic on a opportunity don't will also kind see then this marketing

XXXX? the you that in expected to on high the personal is it's that indicated it's does guidance, respect historically. rate, Or clear then With it's -- side, as loan the to to And better be loan charge-off are net it expecting personal still had somewhat credit that go better? you as cards performing than

level well, industry. out I'm the the the in to happening I information kind a again, of details that in below very, of what's supplement. at But use the it's prime stick charge-off has the -- top impute product of provided. very we set. customer kind would rates a and give performing significantly loss Yes. then, of going there. rate product been guidance And we by it's kind a And

of to product. of a way So that that for give think least about kind at a should view expectations

this thanks to we're us reach going I to very our call the conclude there. Any please think much morning. IR for out additional joining So, team, and questions,

you Thank you. participation. call. today's thank This does your for conclude We

may You disconnect at any time.