DFS - Earnings call 3 2023 | Discover Financial Services

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. My name is Chelsea, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2023 Discover Financial Services Earnings Conference Call. [Operator Instructions]

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

Eric Wasserstrom

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

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

call remarks our John Financial Our include Owen; and Officer. CEO, will our Interim today from John Chief Greene,

will After time we conclude our formal a comments, there session. be question-and-answer for

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

the over call turn John. to I'd Now to

John Owen

our Eric, for and call. to you, today's thanks joining listeners Thank

I a I my as interim shared As months role few three in CEO. priorities had ago,

is First do common experience values every of a by financial team products. we touch XX,XXX a shared a employees which and this service is At point, our award-winning connected customer continued people future. more to and achieve delivering than help an of brighter mission heart the providing at by great a customers

be We've this resolution also with quarters We in engaging anticipate misclassification will process we several fully advance enhancements Consistent our significant across with to on opportunity issue, the terms to By September. resolved. dialogue the remain expect is it complex. made of of priority governance this We've the capabilities investments culture have is in consent order, and made meaningful with regulators the our review further risk coming to corporate second management My you've partners of all the enterprise organization by and strides the in likely FDIC compliance. issue area. The this in the on in our now, to quarters. card the take this had topic. order improving started consent active our merchant issued drive of

revenue priority line XX% credit to driven financial strong strong quarter, by with was up sustain in the third to while ranges. expected third My year-over-year perform growth, is our losses continued performance. In asset

we addition, product. our launch strong of off the with start Debit In are Cashback a to

We continue important an into new channel will company. that welcome this product believe to be customers to our many

To the banking a brand and introduced to we're new just featuring experience highlight national celebrity campaign advertising Discover Coolidge. support Jennifer and our have spokesperson, products, proud

focused elements As we a continue great are to make the to our advance on enhancing place Discover we priorities, work. preserving, to

XXXX our Services the Best accolade For. and one Last to builds Work Financial XXX of Best This month, among were Workplaces in Companies we Insurance. Fortune upon ranked recognition as Fortune's

confident search. call remain to in and sustainable the will coming both excellent business, external. long-term financial handing our all months. briefly Board In We of off will is leader the this identify the several on we The we Before performance. next outstanding target in Greene, driving excellence comment parts internal continue the to I John candidates, CEO for considering that summary, organization

detail. more off will to review I to the in results hand John call now our

John Greene

Slide Thank liquidity $XXX over our balance. by with just along good down this and billion Provision and prior results you, to macroeconomic increase summary financial reserve drove growth million, we the $X quarter, increase I'll our changing year quarter. everyone. in expense charge-offs, net conditions million, from reserves of loan on X. John, morning, grew household strong an $XXX in the income reflecting with and start reported In

was reflected million Net in seasoning XX%. X% portfolio to up line interest on X. Further year-over-year with XX%, $XXX grew expectations. Charge-offs and Revenue deposits income increased grew year-over-year. increased XX% are and remain due expenses details Slide or

This year ended benefits margin points and rates. by was decrease basis by prior higher XX driven offset at from were costs partially points the the from sequentially. which down interest XX.XX%, funding prime higher basis the quarter net down Our XX

basis Sales Personal year-over-year, volume Card up reflecting the the growth points in was about was strength quarter-over-quarter, The but increased levels. a XX and robust. year. growth rate new basis Receivable remains versus driven quarter. XXX XXXX relatively under for lower account points payment just rates. originations above lower and declined XX% the XX%, were payment flat prior rate over year past by loans payment

X%. We Deposit was consumer direct-to-consumer balances with deposits staying XX% billion. disciplined up the underwriting. quarter grew were loans in demand continue while strong solid, growth average and sequentially, experience $X to consumer our Student our in year-over-year X% up

Noninterest or in driven primarily increase loan PULSE Looking on strong and X. Slide at discount other income $XX million was processing higher revenue. our transaction revenue an fee business, by net income increased interchange and revenue XX%. This from

Moving across and reflected to expenses and risk quarter. the our programs, from expense prior X. and management compliance in Total line expenses Slide is up X% is were million primarily several driven or items. operating investments by on X% up our $XX year-over-year of increase This

compliance Looking major Compensation primarily as licensing expense were increase focus software professional reflect fees third-party renewals, increased count. risk processing or increase million head from efforts. driven $XX we in X%, in costs by an at The accelerating our information and support categories. on up expense management our was

from see year XXX X. basis on we prior have to vintages. rates net points and Moving the targeted support with accounts, which XX quarter. prior than strong Slide of consistent long-term seasoning higher These than performance the newer charge-offs basis newer Total to of ranges. older vintages In X.XX%, profitability. points the up continue were Card, delinquency higher remain Losses effects credit

credit X. the Slide losses for to on allowance Turning

XX increasing $XXX reserve a over reflects and loan we basis points reserve our The outlook, balances. higher million, increase our by X%. rate reserves deteriorating quarter, and increased modest macroeconomic This increased by delinquencies

headwinds a labor earnings. consumer and savings strong declining Our relatively macro debt but market, reflect rates increasing assumptions also from

Looking at Slide XX.

payment year. cash growth. rates per share declining range of to driven points there strong be growth by our no for We're with the offsetting dividend There approximately We now period XX for expenses to expectations no expectations basis change X.X% asset be for be in decline common to stock, equity Our X.X% our quarterly be Tier loan full was $X.XX up common our is and to is the largely maintaining X are organic XX% our to charge-offs on sales. impact double sequential XX.X%. year. Slide of and operating between as slowing for NIM expect a our expected declared of mid-teens our The the XX was concluding outlook. the digits, low the net to of for change We

remain strong. In conclusion, fundamentals our business

financial out drive compliance in our management sustainable risk building capabilities generate to and prudently solid results performance. and continue investing long-term while We actions that

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

Operator

[Operator first from Sakhrani Instructions] question And take our KBW. Sanjay with we'll

Sanjay Sakhrani

wanted Just get to little build. reserve a more bit on the

like about you've ahead, you As should with just talk expectations. increasing about reserve John pretty performing said your you numbers how think we are the obviously, Greene, could from rate adjustments, that because some credit but consistent here we look made

think year. So unemployment it on talk assuming is relation go-forward the coverage a see you we next you the how how and about things a basis, change that should reserve about Maybe reflection assumptions don't much. just can on unfolding

John Greene

question. appreciate Thanks, Sanjay. the I

quarter give and a the of me and reserve bit we rate. terms back overview increased of let in little why what in up So the just happened

at growth, look we for represented the growth, a took we a to reserve the had of obviously, and about portfolio loan $XXX million. make as performance that XX% loan and build So the

macros. The on or view $XXX the approximately other XX% million our reflected

other back by and unemployment standards, Now that factor but we we into important strong is done go relatively and past historical done those remain try to of numbers factors, the stress. models, our models line an what found we've seeing are and and the while remains in year the And over we've learnings the certainly of to in terms unemployment that. pandemic other into some there's reserve indications reserves, And loss factors. if build there, we

in both capture seeing in deteriorated, So that and to FICO took and was look more felt standpoint. content as those reserving worth factors macro household we deterioration order from at we rate, have so a savings loss we're bands, appropriate specifically use lower a we net

there's today I'll of the that look we reserve future, things of at items. couple as are process general kind So levels just a say, and into

will macro or views stable the remain whether on dependent deteriorating. it they and be First,

will certainly, third timing the content. And Second, performance trajectory portfolio loss of factor. be will be then the very, very a important and

their right. losses as increase period, So become closer terms our probability of projection could adjusted therefore in and reserve

Now just detail that provided. lot there's a of I

view our a of expectations. me let give So

that performing worse the although FICO lower first, to generally also than stress increased mid bands. We're highly perform portfolio 'XX, are at XXXX is profitable. the well, mildly vintage seeing we FICO So bands slightly 'XX, seeing although

and adjust process we'll as the will appropriate. deem charge-off look forward 'XX, reserve we be to important run An we our piece So as also the trajectory. most

the sometime year is we've said of what So around -- half second midpoint peak we of charge-offs previously the half to the expect second year of XXXX. the to

a if we'll provisions. an certainly, be take indication we that to in could rates that delinquency see quarter, now don't So between first and incremental slowing have

there, to be enough forward hopefully, to lot able with. a So for digest you and move

Sanjay Sakhrani

the still capital regulatory doesn't a to That's consent XXXX, piece, number other And great. have one, actions. terms to update the in seem of the sort of And the question We saw whole management change order. then there's stuff, in it obviously not for lot banner under for you any got that. like just of pause a I perspective

might So the how sort mentioned know think it issue. share sense unpausing about repurchase. quarters to merchant John take to us resolve that could of give you several I just the of a Owen of

trying comments. those So reconcile just to these --

John Greene

Yes, too, I'll Sanjay. take that one,

out me priorities let allocation changed. capital our saying start So by first aren't

our business our our capital management and That's the and excess business model, shareholders. very clear in invest to from team return Board. So

The to issues. and our work the tiering relates answer Card to on the continued other issue second piece governance

So of progress making those. good both on we're reasonably

specifically recommendation as our we'll earnings. what is capital do make and the to our fourth provide an Board quarter planning on with January XXXX the we'll our regarding we'll and call actions process update associated a And then part our buyback, of

John Owen

to FDIC really XXXX, month from just kind order from back. consent Let we that looking standpoint. John's me end add of where are public on regulatory little related The findings this a was a bit answer made of to

investments we've before, compliance said over significant and our risk in made the XX last months. we've capabilities As management

in are. amount million XXXX. our our in but From to where $XXX XXXX standpoint, do I have satisfied we've is to still from resolving spending many increased issues, a a we're you we significant good What progress million with work $XXX we've would we of made about tell of spending before

in point and misclassification on And of an have We've this did misclassification that, outside at FDIC feedback consent the from separate matter. on our also Board our we're the not shared with it's that an we a with card where firms, before, time. in as law issue, of And card of investigation result we time, is that's mentioned point order, On regulators. part are that issue. this we've our Directors That work substantially complete that awaiting regulators. at completed

Operator

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

Bill Carcache

on Greene. I John reserve wanted comments, to up the follow rate

and which impacting cited variables macro idiosyncratic. several more higher referenced the You are reserve you delinquencies, also

concerned than DQs Some just that seasoning. a investors more rising of be function are may

could Maybe that unemployment too an perhaps end just have to the expressed for in in is greater beyond that be particularly some sign during XXXX aggressively environment the is build Discover facing being where possibly would credit and help what now a and you the response we're is consequences that since up growth us the investors have ultimately your X.X%. outsized reserve still the with could rate concern degradation pandemic may reached what

John Greene

Thanks, Bill.

bit originations. let 'XX at So me in happened and what second about little back of real be and the go half a of terms 'XX clear

box. So the with early half and our Discover or quarter went box. the we a quarter prime second traditional early 'XX, turned We second near results and part do 'XX. 'XX, of in We prime, in credit that we marginal the test turned which we off credit back did In on. of we to of saw third we resumed traditional continued and

return means, was if any we certainly thresholds. a some of of to we about see was volatility not profitable by could weren't accounts good but months opportunity those found learn X a dramatic capture So our to share. What meeting origination, test volume

So shut down. they were

and term. Discover The there, we're 'XX team. result long say within the 'XX this, box And from back. rest of demand profitability our outsized very will great peeling that The was certainly credit and as vintage the of the the 'XX vintage remains was in still short medium I execution although a of term, very, remains that traditional term strong had. marketing

at books. again, significantly this it So is to we'd we're all originate point, the the if that certainly other continue put vintages. Yes, larger loans on But the do definitively. than would we going we vintage over answer to

natural out. And somewhere the the is I that and months. loss expect originations And XX new So we sometime as said, peak XX charge-offs content to between of and delinquencies in to play XXXX.

terms I is tolerance to giving in color terms process through, in helpful our of from that we So we vintages. those a expect hope bit what and of little risk went the of see

Bill Carcache

potentially the Board, you in to several that I to that. That's hold I student of else. until ask Or you overall be the appreciate If more any Yes. next kind alternatives could strategic more other comes which follow-up Owen. possibility likely CEO on lending off guess, pursuing the or anything for new is interest a is mentioned of to -- Could that I helpful. whether speak probably the level in potentially John of likely months? your businesses, wait of

John Owen

talk Happy to Yes. that. about

can't you that all rumors of we really tell business. I do or strategic about to businesses standpoint. We every fit do of you we is part annual an selling of As returns from that talk our a year speculate know, process. planning the process strategic can for or our and as evaluate What is parts

We process through But as we our part going planning do of that's again, as something are speak. we annual process. that

Operator

Sachs. question from will next Nash Our come with Ryan Goldman

Ryan Nash

what next I through into referenced that expense process to is expect some know the So talk based obviously But today Owen, on you've plus 'XX, Maybe growth progress inflation. you XXXX? the work overall moving you about And substantial budgeting doing, you you're what that consent is you're that like just base sure I'm a regarding the order, drive which John, sense positive. you of the the guess now. that John reiterated to for guidance right for made expense expense Any going look going year? the pieces

John Greene

with on going in you of the 'XX. what general out be to recommendation of yet budget, specific Board. I share the But the real not to we're a give I'm of building seeing. Sure. direction We're and can we're process kind our still

is So there point efficiency be that think I to important put is our continue the to ratio first below out we target XX%. to

and with that's an efficiency below Now the something investors over and execution with of investments over in medium other business this Obviously, areas But that's term. growth substantial our I the significantly even XX%. year the midterm, can think shows compliance revenue the ratio expect.

of is piece of in either making The will in dollars we with overall positive do firm. programs compliance the risk on that we focused second spend or be compliance earnings that's and disciplined allocation potential that to important dollars. generate our that we're despite a risk the management expense our continue amount sure us And investment significant resources, help and for expense

they're So the focal point.

continue In to looking where of we things footprint. the of look facilities our at we're terms some at,

on progress to some be make that. to continue expect We to able

we're of continue look execute we're they're procurement the to help vendor to sure spend and And scrutinizing to resource we're for going third-party Our what trying and to make our on. levels significantly management teams. at environment the appropriate with

So we're of I that efficiency expense numbers context, about the how hope on set hope we base into good thinking the reasonably some into what translate aggregate. expense is Ryan, And future. provides a that in and will the

Ryan Nash

Bill's and question. Sanjay of some on follow-up the Maybe it. Got

more deterioration trajectory that you us seeing big as So see consumers. customer of next actual of and seasoning? worse to commentary you of we could seasoning through that we've inflation of performance base? much thinking core should likely the meaning how versus book when sort the I actually have this given experienced on help regarding period you underlying see of the any broadly just go delinquencies, the of And that's this that time we begun understand do through. on get this the really vintage think 'XX is how weighing you're much season, about the And coming is delinquency about maybe underperformance Can of how hasn't John in the trajectory that made framing comments vintage, just yet the we 'XX

John Greene

Yes, a lot parse there, Ryan. to

you seeing start Let through of we're the walk me kind portfolio. in what by

differences So that transactor in customers performance revolver. we are historically seeing kind have on versus of been

revolver we're decrease which our in significant seeing more as beginning sales seeing and try right, more. makes a they base, to household activity, transacted manage So budget. revolve We're in that sense, 'XX, 'XX their to accounts 'XX

to is back So the were historically. rate revolve we where

are as that very, vintages, the early indications is well well, as performing very 'XX performing not well. but it's 'XX. And 'XX

happen, the of observing delinquencies If seeing than is that slow are today. doesn't what that's the is half in XXXX. the that consumers that will significant an So my that expectation indication more stress first we're

Operator

from will with Our next question John come Hecht Jefferies.

John Hecht

was the last overlapping. question most my Actually, questions fact that the of and exactly

maybe on quickly a what what environment, that maybe competition number you're activity for you credit kind of that account kind some kind is changes underwriting in ask, maybe on are you to So are as I'll seeing transfer would of migrates What just bit? And guys and you're update doing as competitive with zero kind the tie of one well? environment respect that to of then you the a other kind front? little these factors to quick engaging balance of of

John Greene

Great. Yes, I'll take that.

competitive be from So the standpoint. environment card continues origination to

FICO We are less kind of band. competition seeing in the lower

envelope we're customers So less tier origination is, focused a frankly, lower remember, prime and prime we're the so on revolver, competitive. of

competition, subsided rewards that significantly. credit subsequent are competitive. and upper by we're to ads a that prime The going of it looking make very can remains credit see at to has So the turn you very, certainly not The careful television charge-off. into those as sure worthy we're folks seeking

FICO continue bands. competitive. market positive mindful going The So is situation. various new compete and accounts, to we're also the among And to the but we're competition generate always credit of varies

Operator

come next Jeff Our will Adelson question Morgan Stanley. from with

Jeffrey Adelson

up peak the of losses. wanted just John Greene, commentary to on follow

think mentioned in you sometime I late mid- XXXX. to

I talked around think, of maybe about size, the should last that the this just plateaus quarter, levels? you starts kind delinquencies risk of do at peak or moderating your out Is lower? and losses peaks vintage into getting and those a XXXX. think maybe as XXXX Or you drift there pushed naturally kind higher in

John Greene

Yes.

a will to will then terms I there for think to macro then I quarters, kind subject few we that's the to it it and X stabilize today, expect of its obviously. and all seeing in peak we're peak, come down. That's maybe But up environment, X it upon quarters, the of what expectation. think

Jeffrey Adelson

And then just they know on flattish sales the pretty quarter. were I this volumes,

on the hood, Is then pace of representative and slower still there just maybe Anything under volumes. what's volumes, driving in same-store on faster growing wondering, And network year-over-year. volumes accounts, the this thinking Just is faster your that's going dynamic maybe customer there. growth going a reaccelerate volumes new through more versus your proprietary your of slow? of at faster to network debit a maybe card debit to

John Greene

Yes.

start So let with me sales.

trend So downward sales. what a in seeing is we're

to fourth So quarter go 'XX, if the of you year-over-year back about we're growth. at XX%

X%, mid-October, X%. here quarter quarter third in and X.X% about about through First and was X% quarter, second the in the

in terms Interestingly the of are dynamics enough, changing categories.

X% which is details. with is entertainment the categories, spend to point. to north trying down to largely about online we're of understand me to is day at up which spend around hard expense driven, for inflation the exception is into we dig or entertainment-related of X%, is believe. But That's flat discretionary up And XX%, this X%. every So up

going mentioned maybe sales to in lower revolver transactor, components The next In that already. growth, of that, we're assume of implications I for the digits. terms modest slow relatively single a year,

on the So more revolver base. pullback

is your -- of PULSE piece We've great execution other our business. from had transactions. question debit The debit

made we've actually expanded contractual number choice also and arrangements So debit a in volumes. a difference of the routing has

be So our PULSE team capturing is appears share. executing well to and some

Operator

come question JPMorgan. will Shane next with Rick Our from

Richard Shane

in that driving things a delinquencies. the increase Look, you've cited are of couple

vintage. seasoning about of talked You've

cohorts. to the more You've your At talked a to FICO about starting time, and are lower learning your within lot some portfolio you machine guys exposure the to same process. apply scores

the identifying the are other to demographic, I'm curious this what increase the labor to you other delinquencies, strategies if factors that with performance? markets. are contributing of is, age servicing to And contributing whether in strong follow-up enhance then can in it's factors be that then to context that that might geography, information, that apply you are different

John Greene

into Rick. a the of you underwriting, I'll Yes, sauce But you're overview. little give bit secret of

models. XXX on And So we worth did to is what probably of no find amount revive important, we or is us. is we And risk rate net savings a our spent looked at risk household time trying lot credit identifiers to different exaggeration, splitters. important, the of update

really, important. report So and the sheet -- well discovered really credit as on balance to as off of credit the are amount continue be

then done experienced And whole because underwriting market that of the there's in we cash bureau also, being of credit the off on 'XX. some flow experienced some work or 'XX and

and to to do what accounts going to we're going profitable be can those. refine originate and So our highly are we see continue to that models to look identify

In the channel are part servicing lot been models around on time and some well strategies, focused done as terms learning of contact. of as machine best to second there's contact, on got a that to question we've that best work your of

work ongoing. It text effectively other a -- originate model or never phone, that So and e-mail, will refinement it of continued is the collect stop. is can And that we means. All is will via so it be it frankly, profitably.

Operator

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

Mihir Bhatia

actually wanted personal To to I start, about loans. ask

about here, underwriting personal standpoint? you you driving loan You're to but -- side, just that about should tightening related currently understand vintage to about talk And in in very about to Anything that credit I What's there. the space been on know too? card making then you've if a any I a Are comments comments the some Can like seeing meaningful bit of that? rate flowback, little apply continuing the you're anything little vintage healthy more thinking of do from a on credit there. I be some -- mentioned there? drivers? deterioration to see the we growth what wanted competition you payment bit think the

John Greene

personal our many important and So average ticket recognize of is to as than our for volume the of debt now loan share efforts on larger consolidation, XX% somewhere of goes for between customer ability to the creditors lowered of ensure disbursement is debt pay overall customer to debt our and the part a is And that competitors. to XX% their process the that is high. to of that significantly consolidation predominant underwriting the there's a when therefore, cost

So distinction. that's important an

In of that payment terms seen for growth, but been the that seen has we've in reduction quarter. of of rate. what we've demand, chunk in very the payment significant a the high in growth also is level the reduction responsible a And rate also

terms historical very kind to relative what but the very, from terms of metrics, rates the remain performance of highly I'll performance report in profitable more to and say, In you historical it low delinquency there, from can returning standards. see they the of again, is details or

Mihir Bhatia

from That's look if to a just to outside helpful. issue et timing, the you're firm has It Maybe mispricing and second and saying back completed the like law I issue, sounds the for question merchant related cetera. the could investigation. what the turn compliance

with already. results regulators discussed You've

more the quarters buybacks I of to understand happen happen resume? again, several a it's But for it's a Maybe time out date going going needs I are comfortable? message, understand, quarters put what to to us help is like So that what a a for to of the resume. is but overall people to needs the for lot just want here there. understand several you think I understand be to message to And frame, take what is lot difficult to right trying specific put do ? it's specific you just to to those get

John Greene

Yes.

So no resumption. on specific the timing

we're So further and is what merchants with the our have remediation we ensure dialogue to negotiations. progressing the want to do

to game this discussions and loan And to right? Certainly, we've seen. we're on year. that of regulatory reviewing also capital the those progress on We agencies. We've pulls a the number Basel There's also continue got our looking capital have phenomenal horizon. end we're positions, growth our that's with

the impacting levels. have capital in CECL We phase also

profitability a So make the at making recommendation governance and overall look we're items for a progress the the going to take tiering issue take we're and the Board. risk at look card and to XXXX, a on

So my key be is business to -- our We're shareholders. on in summary my the to changed. capital capital to and earnings here invest return that able focused generating I'll haven't excess say priorities positive

rates margin Our remain robust.

return equity on and really Our quarter year remains this the for strong. really,

it's making sure investing matter we've capital. of return a right So balance and the between just of got

Operator

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

Robert Napoli

on return on equity. Follow-up

years mean, we've over changes. or are the questions strong the last long and of One of in time changes has so. that with Discover being able I we seen Discover regulations very on your XX get for obviously, to reported equity ROE generate a capital the very thoughts potential What types the on return

John Greene

to couple important points. and a going Yes. Certainly, then of history kind of relative forward,

operated of, we does years long our position at approaching XX.X% capital as the say So above capital right? so I've least for target. the we we're X.X%, operating at will the and here strong, X remain regulatory well overall better are with as quarter. the minimums I X.X%, So don't capital part have very, know, here for that SCB XX.X% target been the and X%, on our CETX very . I required now,

business generate business level to equity be to high manage in the and is expectation overall the going able a excess shareholders. on return return high capital to and we're invest to and continue of my to deliver returns So

generate terms X a overall ours positioned well institutions return go we in such of capital X years, predict capital. to positive bit for as levels. to as expectations it's out regulatory challenging a So to capital But and we're the regime and

Robert Napoli

that to on Discover business, I your the high the your overall, of I long-term appreciate for single-digit business loan the and expect? think -- the What should historically, maybe and cash just And to those ability core growth customer, spending grow grow does that. rates, debit growth. I growth TAM of affect kind how thoughts mean And of then your to the growth? we of types back are what continue ability your is the product

John Greene

certainly, continue cashback our of mean, historical norms. kind with at I least is in The a it. grow actually expectation think to product, the power lot we debit has to line Yes. of behind

features we on debit the capture of impact from X% cash So on business are positive a the right? ability interchange our kind those super, transactions. to So have of back transactions, itself product

then and we that well. meeting turn credit to cohort into it's in and So road. underwrite customers further It of new perhaps that's can cross-sell down a executed . And card that positive. whole personal experience will relationship and customer for then terms needs new banking us, in outlet a checking or bring so a additional loan the help the product a customer of

excited we're super about So it.

Operator

from Our next with question Sandler. Kevin will come Piper Barker

Kevin Barker

additional in franchise? you you're up that more you to whether wanted within in to of just info projects line. around Or you projects and making have that particular, expect the be you on some the investments spending provide in those that other there processing place are the investment a Could tech, some detail ongoing? and little the particularly I on anticipate, follow on of tech

John Greene

Yes.

So digital a we're institution.

generate then to customer invest going So also of kind continue advanced returns. in help help their to to the positive experience first piece to us tech analytics and is we're and

of a number to Some target that service got well we're and customers. customers be specific we've right to order so get around -- then on, advanced analytics of collections sort able programs the in the and working projects originations around of

also a savings from funded into of terms improving year customer, a did last or leads lead of customer. a in rate of closure the was into a bunch whether it We credit year this and work

compliance investing systems. heavily in we're year, This and risk our

tech So certainly, there's there. going on spend

hybrid moving have to environment. spend. a to significant a and our cloud on-prime and related That's certainly also We spend servers tech

we're do issues amount the then manual and of And systems also, and taking how looking compliance to the comes spending our risk historically, we've seen lot that kind and what a look of with the that data given work, of the we and data. to time at that data the that touches in goes data a out core reduce

year? processing the and or the overall why spend part kind all of we're this is of of that So tech reason increase reasons seeing information

John Owen

would around That's but fraud on detection, made investments to our I area. quarter, and areas battle in ongoing we've out invest heavily continue that fraud other continue our detection. we significant push in call every fraud Two to

capabilities very open more for as process, our how and and easy of seamless second The effort as customers manner. a spent lot onboard very cashback around we system, our got digital debit engagement bank. to We've digital in and a a we application easy-to-use customers easy thing customer up a customer flows in time

Kevin Barker

Or enhancing you trending a shift your on any past relative particular in rates. have rates today? on they're just you the . follow-up And recovery investment cycles? where to seen recovery Have

John Greene

specific to rates. recovery No changes

as chunk of result this charge-offs seek the charge-offs a these seems We able through of in of July, I The capture from credit are negotiate back increase. be seeing of pool be to recovery obviously we a come saw developing as customers assistance think and cottage overall industry settlements that's more strong. institutions. increasing rates settlements. charge-offs is -- But from remain that. recoveries to a was And month to around There the it

and overall So we a that's actually take at how our reserving. credit of look part --

Operator

Najarian question next UBS. Erika will from come with Our

Nicholas Holowko

growth. This answered, one is to Nick them on loan have question of been on wanted Holowko with up Most just for follow Erika. but

with of parts the band seeing contribution those you're loan in I'm the So FICO that obviously, any can just on and and mid-teens end? and given lower stress whether the mid and the has remains lower your And in delinquency really scores the your the your robust comments if year. which card outsized comments And raised on revolve guidance growth the then are to you rate for trends wondering wondering, us FICO from the portfolio I'm then driving you really normalized. the help growth?

John Greene

Yes.

seeing factors. of we're two driven kind loan is what build So, by

So it's And then build between from somewhere the rate payment the XX% the loan and is of remainder XX% -- normalization. coming new accounts. is from growth is

of So customers portfolio we're seeing of their increasing balances. kind

to that bands and is to the portfolio. -- the payment rate So the it, top midpoint the, consistent X/X normalization of to pretty of the on call upper

to rate from The historical bottom that pretty payment last close third, And mild at deterioration a year. levels, maybe we're the that. normalized seeing

Operator

question from with next Oppenheimer. Our will come Gabriele Dominick

Dominick Gabriele

sort to related Something of that.

-- was spending I or year-over-year we growth? I the growth on if year-over-year about a spending just to Discover the have to roughly what just that related in the to was of quarter and also, saw that, then new number just think guess what the the the And the benefit X%. is in accounts? cards growth So added what And gas follow-up.

John Greene

Yes.

So we're overall number at we we the the look pace year, of about kind we credit I XX%. kind a public of grew made grew accounts taken originate -- and comments same this on accounts. this. performance, to Overall on as XXXX, In of we've about

relatively the year. in and of the consistent quarter will will fourth growth the accounts account could if but That we generation year-over-year. terms pare here So next back into pretty in be credit change new flat, be new

was interesting. In terms that gas, of

up gas So X% the It quarter. also a was X% was category. in

you XX%. for card our usage least kind up adjust deflationary at the impact, when the So was of was over there through

Dominick Gabriele

players. a obviously, then you're loans, have And of student of major lot you one the

I directly, or your because know loans but that, loans, far of We data XX only they're affecting might would you're you for this affects watching the that anything how provide as be helpful. you're seeing provide how what in in you can are days the can data you or either your loans have this ending. private that perhaps rates in refinancings, the really in moratorium but anything or consumer demand private be that whatever, doesn't as you affect payment own seeing

John Greene

repayment thought and of could as we anything it seeing terms to couple actually not associated of order impact that of administration putting the direction we're kind making executive to the of terms levels kind our quantify and quarters did yet data of the whatsoever. income So We in payment our on ago, the portfolio is in in a what charge-offs tied or structure be in levels. based place out, turns Biden

the our expect on be de minimis. impact . We to portfolio

how our data this see make we'll going happens a to today, at out impact have and see a we're charge-offs, look a But what our significant is on plays year, expecting nothing. an take legislatively. adverse we'll certainly evaluate and to impact it Now to but not all it determination if

Operator

like over for concludes to the Wasserstrom remarks. I'd additional the back of call. portion any closing This to the And floor Eric Q&A turn or now

Eric Wasserstrom

joining much Well, for us this morning. very thank you

to you team, any IR Take care. questions, very to If we have out additional hearing from reach the forward much. look you. please Thanks and

Operator

you, Thank and appreciate This concludes we gentlemen. program, today's ladies your and participation.

You may disconnect at any time.

Discover Financial Services (DFS) 19 Oct 232023 Q3 Earnings call transcript