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Financial report summary
?Risks
- Failure to complete the merger with Capital One could negatively affect our stock price and our future business and financial results.
- We will be subject to business uncertainties and contractual restrictions while the merger with Capital One is pending.
- Shareholder litigation could prevent or delay the closing of our pending merger with Capital One or otherwise negatively affect our business and operations.
- We have incurred and are expected to incur substantial costs related to the merger.
- Because the market price of Capital One common stock may fluctuate, our stockholders cannot be certain of the precise value of the merger consideration they may receive in our pending merger with Capital One.
- Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company following the proposed merger with Capital One.
- The Merger Agreement between us and Capital One may be terminated in accordance with its terms and the merger may not be completed.
- Combining us and Capital One may be more difficult, costly or time-consuming than expected, and the combined company may fail to realize the anticipated benefits of the merger.
- The combined company may be unable to retain our and/or Capital One personnel successfully after the merger is completed.
- Economic conditions could have a material adverse effect on our business, results of operations and financial condition.
- Financial regulatory developments have had an impact and will continue to significantly impact the environment for the financial services industry, which could adversely impact our business, results of operations and financial condition.
- We face competition in the credit card market from other consumer financial services providers and we may not be able to compete effectively, which could result in fewer customers and lower account balances and could materially adversely affect our financial condition, cash flows and results of operations.
- We incur considerable costs in competing with other consumer financial services providers and many of our competitors have greater financial resources than we do, which may place us at a competitive disadvantage and negatively affect our financial results.
- The inability to compete against other operators of payment networks and alternative payment providers could result in reduced transaction volume, limited merchant acceptance of our cards, limited issuance of cards on our networks by third parties and materially reduced earnings from our payment services business.
- If we are unsuccessful in maintaining a strong base of network licensees and achieving meaningful global card acceptance, we may be unable to achieve long-term success in our international network business.
- Economic and regulatory challenges facing the student lending business could have a negative effect on our student loan portfolio.
- The potential sale of the Discover Student Loan portfolio and transfer of servicing of such loans to a third-party provider may result in disruptions to our business and operations, and no assurances can be made that such sale and/or servicing transfer will be completed or will be as successful as projected or expected.
- Acquisitions, strategic investments or divestitures may not be successful and could disrupt our business, harm our financial condition or reduce our earnings.
- The failure to successfully manage credit risk, which may result in high delinquency and charge-off rates, could materially adversely affect our business, profitability and financial condition.
- Adverse market conditions or an inability to effectively manage our liquidity risk could negatively impact our ability to meet our liquidity and funding needs, which could materially adversely impact our business, results of operations and overall financial condition.
- An inability to accept or maintain deposits in the future could materially adversely affect our liquidity position and our ability to fund our business.
- If we are unable to securitize our credit card receivables, it may have a material adverse effect on our liquidity, cost of funds and overall financial condition.
- The occurrence of events that result in the early amortization of our existing credit card securitization transactions or an inability to delay the accumulation of principal collections for our existing credit card securitization transactions would materially adversely affect our liquidity.
- A downgrade in the credit ratings of our or our subsidiaries’ securities could materially adversely affect our liquidity, results of operations and financial condition.
- We may not be successful in managing the investments in our liquidity investment portfolio and investment performance may deteriorate due to market fluctuations, which would adversely affect our business and financial condition.
- Changes in the level of interest rates could materially adversely affect our earnings.
- Our risk management framework and models for managing risks may not be effective in mitigating our risk of loss.
- If the security of our systems, or the systems of third parties we rely upon, is compromised, our business could be disrupted and we may be subject to significant financial exposure, liability and damage to our reputation.
- If we cannot remain organizationally effective, we will be unable to address the opportunities and challenges presented by our strategy and the increasingly dynamic and competitive economic and regulatory environment.
- We may be unable to increase or sustain Discover credit card usage, which could impair growth in, or lead to diminishing, average balances and total revenue.
- A reduction in the number of large merchants that accept cards on the Discover Network or PULSE network or in the rates they pay could materially adversely affect our business, financial condition, results of operations and cash flows.
- Our business, financial condition and results of operations may be adversely affected by merchants’ increasing focus on the fees charged by credit card and debit card networks.
- Political, economic or other instability in a country or geographic region, or other unforeseen or catastrophic events, could adversely affect our business activities and reduce our revenue.
- Fraudulent activity associated with our products or our networks could cause our brands to suffer reputational damage, the use of our products to decrease and our fraud losses to be materially adversely affected.
- The financial services and payment services industries are rapidly evolving and we may be unsuccessful in introducing new products or services on a large scale in response to these changes.
- Failure to manage our relationships with third-party service providers could result in our revenue or results of operations being materially adversely affected.
- If our key technology platforms become obsolete, or if we experience disruptions, including difficulties in our ability to process transactions, our revenue or results of operations could be materially adversely affected.
- If we are unable to recruit, retain and motivate key officers and employees to drive our business, our business could be materially adversely affected.
- Merchant defaults may adversely affect our business, financial condition, cash flows and results of operations.
- Damage to our reputation could negatively affect our business and brand.
- We may be unsuccessful in protecting or defending our brands or other intellectual property, or third parties may allege that we are infringing their intellectual property rights.
- Laws, regulations and supervisory guidance and practices, or the application thereof, may adversely affect our business, financial condition and results of operations.
- Current and proposed laws and regulations addressing consumer privacy and data use and security could affect the competitiveness of our products and increase our costs.
- Litigation and regulatory actions could subject us to significant fines, penalties and/or requirements resulting in increased expenses, oversight and reputation risk.
- We may be limited in our ability to pay dividends on and repurchase our stock.
- We are a holding company and depend on payments from our subsidiaries.
Management Discussion
- The highlights below compare results as of and for the year ended December 31, 2023 against results as of and for the year ended December 31, 2022.
- •Net income was $2.9 billion, or $11.26 per diluted share, compared to net income of $4.4 billion, or $15.44 per diluted share, in the prior year.
- •Total loans grew $16.3 billion, or 15%, to $128.4 billion.