The Zacks Consensus Estimate was of adjusted earnings … Great, thanks. Hi. Look, we're entering what's historically the most important part of the year in terms of spending in consumer behavior. So, it's actually relatively small, the -- on the delinquency number, it's somewhere between 5 and 10 basis points. I will now turn the call over to Mr. Craig Streem, Head of Investor Relations. And do you look at these types of opportunities as market share gain or is that too premature to be thinking about that? We took swift action on expenses and are continuing to invest in core capabilities so we're prepared for the recovery when it comes. Thanks. Thank you for taking my questions. The trajectory of charge-offs based on what we're seeing right now, looks like we would expect elevated charge-offs starting more in the fourth quarter and then coming into 2021. Good morning. So, I thought I'd take the opportunity to ask you how you would answer that question? And Bob, in terms of the sales trends, we haven't broken it out between brick and mortar and online. Great. They'll overall be relatively stable, subject to kind of the mix of balance transfers and promos. Do you have any thoughts on your position of strength, how you could use that, maybe on acquisitions? Betsy Graseck -- Morgan Stanley -- Analyst. Discover Financial Services (NYSE:DFS) - Analysts at Oppenheimer lifted their FY2020 earnings per share estimates for shares of Discover Financial Services in a research report issued on Tuesday, December 1st. Your next question comes from the line of Bob Napoli with William Blair. No, the cost there on the ABS that's reflected is net a the hedge impact. Just to give us a sense of how much your deposit funding on average could compress? So, we're prepared for the worst, but I feel like we're in a better position. And I guess, I'd point you, the returns we're generating as an example of the effectiveness of that business model, even through extremely challenging cycles. Good morning. Credit performance remained stable in the quarter. Excluding this, operating expenses were down 6% year-over-year. So, I was going to say, in my 20-plus years at Discover, I've seen a lot of things but I've never seen anything like this, in terms of the speed and magnitude of impact of pandemic has had on the economy. So we're submitting our second round of stress test in November and included in there are a number of judgments. The higher payment rate is a big factor as well. We clearly benefited from the actions we took in the first half of this year to protect employees, manage credit risk and control costs, while preserving momentum on long-term investments. So, in the first quarter, our NIM was 10.21% and then in the second quarter, it came down to 9.81%. Our primary interest is in the payment space, but while valuations have come in a bit, especially, we are a cross border type company, they is still very high. So, the consumer is stronger coming into this recession than coming into the Great Recession. And so, it's really where our growth is occurring and that promo makes that will drive it as opposed to reacting to competitors. Just thank you everybody for your interest. I guess, I was hoping you could talk a little bit about the performance that you've seen with respect to borrowers that are exiting forbearance, and the fact that you're assuming kind of 11% unemployment at year-end. Hi, good morning. Thanks. Thanks. So let me start by talking a bit about the unemployment rate, and then I'll pass it to John to talk on the reserves. And then, I wouldn't call it a bulge but a higher level of overall charge-offs in the middle to second half of '21. But knowing you'll see message resonates surprisingly well. Of course, the safety of our employees continues to be a top priority, all areas of the Firm, including our 100% US-based customer service team are operating effectively in a remote environment and we have informed employees they will not be required to return to our physical locations until after January 1, 2021, at the earliest. Our common equity Tier 1 ratio increased 50 basis points sequentially, primarily due to the decline in loan balances. We've continued to fund our quarterly dividend at $0.44 per share of common stock in line with requirements provided by our regulators and approved by our Board of Directors. So, sorry, I can't be -- yeah. Yeah. Just hoping to get a little more color there. Nevertheless, we've continued to see strong demand with average consumer deposits increasing 22% year-over-year and now making up 60% of total funding. Consumers shifting from physical to digital purchases, and there, I think our advantage of having our proprietary network and the work we're doing with other major networks on SRC will be helpful. Shares are up 32.9% since reporting last quarter. The earnings release will be available through Discover's Investor Relations website at https://investorrelations.discover.com . So, there was a bit of a mix shift to some products with lower fees and rates. But I've been getting some investor questions regarding how to think about the reserves that you're building today versus the loss experience you had during the Great Financial Crisis. If we can do that -- do some promos or balance transfers safely in a credit environment we will do that, because it would be high returning -- high returning customers. Today, I'll recap the financial results for the quarter and provide details on our credit performance and loan provisions. And we're going to -- we're going to work through kind of the details with the Fed, other regulators, rating agency and then our Board. And you're seeing some little bit more resiliency on the asset yields. But I think as you look at our portfolio, I'm very pleased with the performance across all products. Discover Financial Services (NYSE:DFS)Q3 2020 Earnings CallOct 22, 2020, 8:00 a.m. And so we feel good about that. Turning to loan growth on slide five. The pandemic continued to have a significant impact on sales volume, as well as loan growth through the quarter. Likewise, Betsy. Sales returned to growth in September, up 4% year-over-year, with improvement in all categories. And we also think that we'll come near the top on the payment prioritization through even a tough, tough downturn. Okay. Thanks, John. I know you already addressed one question on that earlier in the Q&A. At Discover Financial Services, we promise to treat your data with respect and will not share your information with any third party. And thanks to our listeners for joining today's call. And now, it's my pleasure to turn the call over to Roger. Thanks for joining us. I'll pass to John to talk a bit about the reserve, yes. Just trying to get a sense on how you guys are thinking about the securities portfolio and whether or not you would extend duration to pick up some yield given the NIM at a trough in 2Q? Discover Financial Services. Now, as I said in the March remarks, which you clearly picked up on Ryan was that, the bulk of that has been on marketing and brand. For our customers, we continue to provide an industry-leading service experience, leveraging our digital capabilities and with average answer times in our call centers remaining at pre-pandemic levels of under one minute. Our disciplined approach to capital management and liquidity remains a top priority for us, particularly in the current environment. So, we were mindful in terms of what we included here in the presentation, as well as in terms of the comment to provide frankly an additional insight in terms of what's happening to the funding mix, the maturity profile and the cost of our debt stack. As we considered the level of allowances needed, we modeled several different scenarios. Nevertheless, the reserve build reflects our view that persistent long-term unemployment will increasingly impact prime consumer lending portfolios. We remain on track to deliver the $400 million of expense reductions we previously announced, even as we continue to invest in core capabilities, including analytics and data science. So we will continue to ensure that the ABS channel is there and present and available to us, but it will certainly come down as maturities profile indicates. It has come down recently. So if you put those two together and compare where we are in the third quarter versus where we were in the first quarter and call the first quarter pre-pandemic, relatively stable. Please go ahead. We saw American Expressbuy Kabbage. Moshe Orenbuch -- Credit Suisse -- Analyst. The trend continued through the first half of October with sales up 7%. How Bad Could Credit Card Losses Get During the Pandemic? And we're going to -- we're going to use that, frankly, as a new benchmark in order to really make some determinations on what we need to spend in 2021 to ensure that we continue to grow profitably. We are continuing to look at the mix and incentives to ensure we're driving appropriate level of profitability for the investments we're making there in the payments business. One of the capabilities we've been working on is just the ability to react more quickly and that helped us react very quickly to the pandemic, in terms of tightening credit across all our products, but that should also help when job losses abate and it becomes time to widen the credit box as well. The improvements in sales volume continued during the quarter with a return to growth in the month of September. I'm pleased to say we are on track to have most of our top 200 merchants enabled for contactless in 2020 and to have contactless cards issued to the majority of our card members by the end of the year. P/E Expansion Could Be In Play For Discover Financial, But I See Better Options. Operating expenses were down 9% year-over-year, driven by marketing expenses and professional fees. We know you pulled back a little bit to this point to manage expenses, but given that consumer seems to be rebounding, will you be a little bit more aggressive on rewards or marketing as we head into the holiday season. I just wanted to see if we could kind of square the circle around unemployment and where the unemployment rate is and the kind of liquidity that the consumer has been given up until this day. Discover Financial Services (NYSE:DFS) Q3 2020 Earnings Conference Call October 22, 2020 8:00 AM ET. So -- yeah. I'll cover the first part and then pass it to John. The drop in spending during the pandemic and our own credit tightening has impacted loan growth, but another driver has been a significantly higher payment rate in our card and personal loan portfolios. This was partially offset by a 16% decrease in rewards costs. So, John, I think in your prepared remarks, you commented that you're looking for additional efficiencies. And I think that's a function of some of the government stimulus, function of our collections operations, and the value of our credit card overall versus other payment forms or other payment forms, as well as what it means in terms of ability to operate in the digital economy. In the quarter, we had $1.3 billion to the allowance, primarily due to further deterioration in the macroeconomic outlook. And if another round of stimulus doesn't come in, I think that's going to be tough for a number of people that have been impacted by the pandemic. And that's within the significantly tightened credit box that we have. While total revenue was down from last year, reflecting the slowdown in the economy. Personal loan net charge-offs decreased 90 basis points year-over-year. The company's filing status is listed as Withdrawal and its File Number is 364020792. Credit performance remained very strong in the third quarter. And you can see that from the broadest metric we disclosed, the 30-day delinquency rate. Thanks, Rick. Hi, good morning. So I would start up by stating that the portfolio performance versus what we thought it potentially could be when we close the book in March has been extraordinarily strong. To date, we enrolled a total of $3.4 billion of card loans. And I was just wondering how much -- how you think about the dividend going forward and how much of a priority is to maintain it, given some shareholders look at it as an important or just maybe how you think about it given the trajectory of your earnings? And does that feed into your reserve analysis as well? And as I said in my prepared remarks, most -- the high majority of the people who entered the card program have exited and are repaying. Since June 30th, we have decreased our online savings rate 41 basis points, down to 0.60%. Our net interest margin bottomed out in the second quarter and improved 38 basis points to 10.19% in the current quarter. Yeah, we are seeing a -- certainly a push from '20 into '21. areeba is … As we said pricing, given how hard it is to reprice cards after the Card Act, we're not reacting to specific competitors in a given quarter, we're taking -- working closely with financing, a very disciplined through the cycle book. Thanks, Craig. Cumulative Growth of a $10,000 Investment in Stock Advisor, Discover Financial Services (DFS) Q3 2020 Earnings Call Transcript @themotleyfool #stocks $DFS, Why Discover Financial Services Stock Rose 12.5% in October, 7 U.S. Banks That Will Need to Hold More Regulatory Capital. Even in this challenging environment, our organic student loans were up 7%, reflecting innovative features like our multi-year loan and our strong competitive position. However, the majority of customers needed only one month of assistance. Net interest income was down 6% as the impact of lower market rates was partially offset by lower funding costs. Moving to Slide 9. Discover Financial Services (NYSE:DFS)Q2 2020 Earnings CallJul 23, 2020, 8:00 a.m. Just wanted to drill down a little bit further on the funding tailwinds. Could you give us a better sense of kind of what mix you're targeting between the DTC and affinity deposits and the brokered? So that's going to further impact not only service industry, but the entire economy. Thanks. Now, as always, it's my pleasure to turn the call over to Roger. What percentage of the portfolio is promo right now, because it sounds like that's going to help on the card yield going forward. In terms of new accounts, while we don't disclose a number on that, what I would say is that, we think we probably sustain new account marketing more than a lot of competitors as I look at industry metrics. [Operator Instructions] Our first question comes from the line of Sanjay Sakhrani of KBW. Hey, Sanjay, it's Roger. Our next question comes from the line of Mihir Bhatia of Bank of America. And so can you just talk about where the -- perhaps the job losses come from? Yeah. Our call today will include remarks from our CEO, Roger Hochschild; and of course, John Greene, our Chief Financial Officer. Cumulative Growth of a $10,000 Investment in Stock Advisor, Discover Financial Services (DFS) Q2 2020 Earnings Call Transcript @themotleyfool #stocks $DFS, Why Discover Financial Services Stock Rose 12.5% in October, Discover Financial Services (DFS) Q3 2020 Earnings Call Transcript, 7 U.S. Banks That Will Need to Hold More Regulatory Capital. At this time, I would like to welcome everyone to the Third Quarter 2020 Discover Financial Services Earnings Conference Call. Within the retail category, home improvements has been exceptionally strong, up 19% in the quarter on high consumer demand. Apart from the one-time impairment charge, we anticipate realizing $400 million of expense reductions from our previous guidance range. And finally strong execution on our targeted expense reductions. We are in the process of preparing our second stress test submission and will determine our share repurchase and dividend actions subject to the final stress capital buffer, regulatory and rating agency expectations and Board approval. Our next question comes from the line of Rick Shane of JP Morgan. Please refer to our notices regarding forward-looking statements that appear in today's earnings press release and presentation. Thanks. That all makes sense. I don't see the need for expanding our products. Discover Financial Services: The Worst Is Yet to Come, Copyright, Trademark and Patent Information. We certainly have seen some indications across the economy that across the nation and, frankly, the world that it could be a tough winter here from a COVID standpoint. Our operating model supports our commitment to providing flexible work arrangements as long as necessary to ensure the safety of our staff and their families. I would say, as you take a look at the capital trends for the business, they are super solid, our capital levels are higher than our targeted levels. I believe we're gaining share, both in terms of sales and loans and card and had a very strong peak season for student loans. Just the jobless claims 787,000 this morning, big improvement, but ridiculously high report of that sort. So, thanks. Great. Discover Financial Services Q1 2020 earnings call dated Apr. Market data powered by FactSet and Web Financial Group. We've continued to see positive trends in retail, which were up 7% in the second quarter and 15% in the first half of July. Outside of a one-time item, operating expenses were down as we started to benefit from our expense reduction programs. The credit performance in our portfolio has been stable and we believe that the actions we've taken over the past few years, including reducing our contingent liability and the additional credit actions we implemented in March, position us well. Roger, clearly there's nothing that we see within the credit metrics that suggests weakness outside of the headlines on potential white collar layoffs. Have a good day. While keeping too much money in your checking account could mean losing out on interest earnings, cutting your balance too close to zero is a checking account mistake that should be avoided. Average consumer deposits were up 22% year-over-year and up $2.7 billion from the second quarter. Got it. And it sounds like we -- obviously, we both agree that delinquencies probably, given this liquidity don't even start rising until the first of the year. Good morning, good afternoon, my name is Maria, and I'll be your conference operator today. In our other lending products, organic student loans increased 7% from the prior year and personal loans decreased 5%. We took a conservative reserving approach and added $1.3 billion to the allowance for credit losses. There is some reason to be optimistic, but no one can tell on these sorts of things these days. And so, as we think about how we use capital, the top priority is supporting organic growth, next comes a mix of dividends and buybacks. The delinquency trends have been, from my standpoint, very, very encouraging. And good morning, everyone. Marketing and business development expense was 42% lower year-over-year as we responded to the significant slowdown in the US economy. And the decision will be subject to two factors: one, the amount of liquidity we have on the balance sheet. In terms of trajectory of both delinquencies and charge-offs. Roger, understanding that there will always be one-off investments that need to be made. And Kevin, maybe one thing I would add to it. Discover Financial Services plans to report its second quarter 2020 results after the market closes on Wednesday, July 22, 2020. Turning now to slide nine, showing credit metrics. So first having been here for over 20 years, I have to maybe disagree with the phrase chronic under investment. Your next question comes from the line of Don Fandetti with Wells Fargo. Craig A. Streem -- Vice president of Investor Relations. So we did see lower global acceptance expense in the quarter and that's a function of two things, a little bit on the economy and liability associated with some of our partners executing on kind of terms associated with previous incentive agreements. On Slide 4 looking at key elements of the income statement. He has been an important partner to Roger, our leadership team and for me. Operating expenses were flat to the prior year, but down 6% excluding a one-time item. Other loan products were generally flat from the prior quarter. So then, finally. You've seen a lot of recessions and changes. So, to John's point, we really think about it just in terms of at a macro level as opposed to what those checks may do in one month for a given household. Thank you. I guess, my question is on the reserve build. Credit Card. Now as we look through the balance of this year and some of the actions that we took, we saw benefits across a host of P&L lines, expense line specifically. Discover Financial Services plans to report its first quarter 2020 results after the market closes on Wednesday, April 22, 2020. Discover Financial Services DFS incurred first-quarter 2020 adjusted loss of 25 cents per share. Now, I do expect some of that to normalize over time, but again, we're going to continue marketing through the fourth quarter. The traditional links between unemployment and delinquency and charge-offs, we're trying to model that. What COVID has meant to account growth, how you flexed? Great. Our next question comes from the line of Ryan Nash of Goldman Sachs. Employee compensation was up $32 million or 7%, driven by staffing increases, mainly in technology, as well as higher average salaries and benefit costs. 5. Sorry, I can't be more specific on that. Net charge-offs improved 130 basis points and the 30-plus delinquency rate was down 39 basis points from the prior year. The results beat Wall Street expectations. We saw the peak in the cards program during the first week of April at $673 million. Donald Fandetti -- Wells Fargo Securities LLC -- Analyst. Our next question comes from the line of Moshe Orenbuch of Credit Suisse. So in terms of fraud, it doesn't reflect any renegotiations with any of our merchant partners. Good morning, Roger and John. In March, we suspended our share buyback program in response to the economic environment at that time and it remains suspended. I'm just wondering if we could dig into the account growth aspect of that equation just to understand how account growth has been going. And we've talked a bit about temporary unemployment, as well as the impact on sort of entry-level retail, entry-level hospitality, entry-level restaurant. Our common equity Tier 1 ratio increased 40 basis points sequentially, mainly due to decline in loan balances. And then third, which is a consideration of their business is certainly the customer relationships and ensuring that our long-term good quality customers aren't feeling like they're impacted in a way that's unfair. So, Roger, I mean, these are the times where you can potentially step in and gain share and be opportunistic. While we remain conservative given the continued level of economic uncertainty, we feel good about the actions we've taken today and the strength of the Discover franchise. We'll continue to look for opportunities to reduce deposit costs. I mean, I think we would have expected a little bit more of a big bulge coming out of the deferral periods and the expiring of a lot of the stimulus. Roger C. Hochschild — Director, Chief Executive Officer and President. Revenue, net of interest expense decreased 7% in the second quarter, primarily driven by lower net interest income due to NIM compression and lower net discount and interchange revenue reflecting decreased sales volume. I'd say maybe one of the big differences versus the neobanks is perhaps a different focus around profitability. Under CECL, as you know, right, that is reserves for the life of loan for the loans we have on our balance sheet. Our next question comes from the line of Mark DeVries of Barclays. Discover Financial Services: Earnings Beat Does Not Offset Challenges D.M. The 30-plus delinquency rate was 42 basis points lower than the prior year and down 24 basis points from the prior quarter. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. I'll walk through our results starting on slide four. I think we are leveraging that position of strength. Moving to slide 11. I really appreciate that. And then regarding your comments on the charge-off rate peaking into late '21. Our key macro assumptions were an unemployment rate of 11% at the end of 2020 and slowly recovering over the next several years. After that, we'll continue to offer assistance to those who qualify on a customer-by-customer basis. Any outsized amount of liquidity on your balance sheet. Yeah, thanks. I am sure most, if not all of you, have interacted with Craig over that time and enjoyed a great relationship with him. Sales volume turned positive in September and net interest margin expanded nicely. And there is always a lot of competition in cash rewards from major issuers. Our next question comes from the line of Meng Jiao of Deutsche Bank. At this time, I would like to welcome everyone to the Second Quarter 2020 Discover Financial Services Earnings Conference Call. DM Martins Research Mon, Oct. 26 5 Comments. And as I said earlier, we're going to be mindful in terms of those sorts of decisions. And our funding stack has been such that more expensive funding sources are fading away and we're getting a benefit there. Thanks. Discover Financial Services Q3 2020 Earnings Call Oct 22, 2020, 8:00 a.m. Please refer to our notices regarding forward-looking statements that appear in today's earnings press release and presentation. Sanjay Sakhrani — KBW — Analyst Yeah. We moved aggressively to reduce our deposit rates. So, some of that will be based on the funding of our balance sheet and some of it will be based on the competitive environment that we're dealing with. Sounds good. So just -- one thing on the receivables growth. Thank you, Maria. So, I'll let John cover the part about reserves Sanjay. And after we conclude our formal comments, there will be time for Q&A session, and we ask you, please to limit yourself to one question, and if you have a follow-up, we'd like you to queue back in toward the end and we'll try to accommodate as many participants as we can. But then also marketing investments that drive profitable growth and high returning accounts. ET. Yeah. Betsy Graseck -- Morgan Stanley -- Analyst. Delinquency levels coming into the recession -- this recession versus the Great Recession, are lower. Consumers have had improved household cash flows due to reduced spending government stimulus and have taken this opportunity to boost savings and make larger payments against their loans. Thank you. And Sanjay, in terms of reserving, we modeled a number of different assumptions that took a conservative approach across the board. We did model a second round of stimulus, we don't know if that's going to happen. And maybe just -- I mean, if you could get, John, some -- if you could give us some color on how much of your spend today is online and what it was prior to the pandemic? Yeah. We earned $2.45 per share, driven by solid credit performance of our portfolio and significantly lower operating expenses. Okay. And in particular, I think we called out on the last call some of the cost per account that we were seeing in different channels as competitors pulled back more. I'm not going to give a bunch of detail here, but what I can say is, we look at the second quarter as likely the trough on NIM overall. Your last question comes from the line of Kevin Barker with Piper Sandler. Yes. Discover Financial Services has confirmed Earnings date and time. I enjoyed the conversation -- excuse me, this morning and we're available for any follow-up questions that you may have. The Earnings Whisper Score gives the statistical odds for the stock ahead of earnings. Thanks. Yeah. But there had been some concern among investors when you guys gave guidance earlier this year, pre-COVID that Discover may have lost its expense discipline and that's the reason that you guys at the time guided to negative operating leverage was due to years of chronic under investment. We -- our underwriting standards have tightened mildly through this and it's positioned pretty well and open for business. But management's intent is unchanged. Thanks. Credit performance in this product continues to benefit from tight underwriting and a high percentage of cosigned loans. Yes. Can you maybe just talk about some of the puts and takes from here. Kind of a short-term question. So I'll talk about the credit outlook and then handle the mortgage question on the back end. Craig is going to continue to lead the IR team until a successor has been named and is in place. 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Revenue decline in net discount and interchange revenue decreased 18 % driven by a 16 decrease. 41 basis points from the line of Ryan Nash of Goldman Sachs what... In that range -- Director, Chief Executive Officer and President points year-over-year consternation around booming credit headwinds in Q. Use that, I ca n't be more specific on that one, out branch. A combination of two things the cards program during the first half of '21 into more! Financial Group the credit card 30-plus delinquency rate reflects the overall economy and keeping the from... We like the funding difference between those two 'll cover the part about Sanjay!
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