You can unsubscribe to any of the investor alerts you are subscribed to by visiting the ‘unsubscribe’ section below. A conference call to discuss the firm's results, outlook and … Turning to slide eight. Or are you going to sort of hold tight given the uncertainty. Thank you, Roger. 5. Appreciate the color. 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. Congratulations, and I hope you have some great plans. So, overall, we feel very comfortable with our reserve today, and as the economic conditions unfold, that will have an impact, either plus or minus on the overall reserve. We didn't actually quantify that, but as we were making determinations on economic scenarios, and frankly, the overall quantum of reserves and reserve coverage, it was one -- it was a point that helped us get to where we arrived. We've been intentional about that in terms of taking a look at promo balances, as well as balance transfers. 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. We've been talking for a long time. Discover Financial Services: The Worst Is Yet to Come, Copyright, Trademark and Patent Information. Certainly, the mix of revolvers and transactors will also have an impact and typically impacts the fourth quarter a bit but. Okay. Average consumer deposits were up 22% year-over-year and up $2.7 billion from the second quarter. Thanks. Credit performance in this product continues to benefit from tight underwriting and a high percentage of cosigned loans. And why such a large magnitude of white-collar versus the still unemployed, call it, blue color that we saw now? Okay. There was also some higher incentives that came through based on the mix that we enjoyed in the quarter. In terms of marketing, while we did cut expenses in line with the economic environment, we've continued to market across all of our products that have been very excited, actually, about the quality of new accounts we're bringing in on the card book, as well as some of the costs we're seeing as competitors pulled back more aggressively. I don't think any of us in business has seen this. And so can you just talk about where the -- perhaps the job losses come from? In summary, solid results in the third quarter, the portfolio remains stable with improvements in overall delinquency levels, reserves were flat, except for those pertaining to student loans where the balance and commitment levels increased. 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. In these uniquely challenging times, I'm pleased with Discover's results and how well our business model has performed. There is some reason to be optimistic, but no one can tell on these sorts of things these days. The bulk of the reduction was in brand marketing and card acquisition. Discover Financial Services Announces First Quarter 2020 Earnings Release on April 22, 2020 and Conference Call on April 23, 2020 Discover Financial Services (NYSE: DFS) … 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. Can you discuss how that's been performing. First, I just wanted to clarify, did I hear correctly, you said you have modeled the second round of stimulus in your modeling for credit. Good morning. Contents: Prepared Remarks; Questions and Answers; Call Participants; Prepared Remarks: Operator. But the leverage that we're going to get in future quarters will come out of the funding base. [Operator Instructions] Your next question comes from the line of Meng Jiao with Deutsche Bank. Thank you. But overall, as you look at where we are this quarter, I see some upside from that from my vantage point today. And I guess I'm also struck by the stuff we see in the industry that there is continued more cash back mail from some of your big competitors where that wasn't as big a focus. Since then we have seen steady improvement across almost every category as the economy reopened. Discover Financial Services, Inc is a Massachusetts Foreign Corporation filed on June 27, 1995. And so we feel good about that. We saw the peak in the cards program during the first week of April at $673 million. So, I'll let John cover the part about reserves Sanjay. Before we open up the call for Q&A, I wanted to announce that after a career in consumer finance, including many years at Discover, Craig Streem has informed us of his desire to retire. Thanks, Dominic. Now, with all that said, I'm seeing a persistent low rate environment and with the persistent low rate environment I do believe that there is some amount of room to price downward. But maybe you could just talk about what will drive the impacts that you're expecting in the next few quarters in credit quality? Great. Your next question comes from the line of Betsy Graseck with Morgan Stanley. Thank you. And Bob, in terms of the sales trends, we haven't broken it out between brick and mortar and online. The trend continued through the first half of October with sales up 7%. So we're really excited. We do enjoy slightly better pricing if it's a direct relationship versus through a brokers. As we considered the level of allowances needed, we modeled several different scenarios. Now, the 11% does feel at this point like a, I'll call, a robust number, but what we -- what we're trying to get clarity on is, as the service workers who initially were impacted by the pandemic containment activity went to the unemployment ranks, some of those have returned. Moving to Slide 6, which shows our allowance for credit losses. Yeah, we are seeing a -- certainly a push from '20 into '21. Got it. I think the unemployment rate we're seeing now is very different. Thank you. Discover has a very strong financial foundation, loyal customers and a proven business model, I am confident that we have taken the correct actions to strengthen the Discover franchise and we are well prepared to continue to drive long-term value to our shareholders and customers. We generated a net loss of $368 million, or $1.20 per share. The provision for credit losses improved by nearly $50 million from the prior year as a result of the decline in net charge-offs and a lower reserve build. Thanks. So that's going to further impact not only service industry, but the entire economy. So good news on what it's doing on the deposit side of our business. And then, I know, John, you mentioned the forbearance or the Skip-a-Pay has positively impacted delinquencies by a modest amount. I don't see the need for expanding our products. Our next question comes from the line of Dominick Gabriele of Oppenheimer. In the -- with such low funding on the ABS, why not maintain that or expand it? Good morning, Roger and John. Excluding purchased loans, the 30-plus delinquency rate improved 37 basis points from the prior year and 8 basis points sequentially. John, on net interest margin, you saw some really nice expansion, you talked about the benefits that you are seeing from lower promo activity. Got it. So you touched on a lot there, and I would sum it up by saying there's a level of uncertainty around what actually will happen on unemployment. Discover Financial Services Dips on Earnings Miss The company flips into the red on the bottom line due to the now-expected heavy provisioning. We're effectively a -- added interest rate, basically balanced interest rate risk position. And it's part of why we're so committed to continuing to build out our analytics capability. 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. The results beat Wall Street expectations. Operating expenses of $1.1 billion were flat to the prior year and included a $59 million one-time impairment charge to our Diners business, relates to the impacts of the slowdown in global T&E spending. Thank you. And so, further reserve increases would mean that we had further deterioration in the economic environment or would be based on the growth of the balance sheet as we look ahead. Turning to Slide 7, which details sales trend by category through mid-July. The Algorithm predicts "% Predicted Move After Earnings Announcement" (PMAEA) for DFS three weeks prior to earnings date. And then regarding the liability side, the order of magnitude and the drop in liability costs over the last couple of quarters are obviously very strong, just given the rate environment. In terms of the rewards program, our program is well suited to this environment. Sanjay Sakhrani — KBW — Analyst Excluding this, operating expenses were down 6% year-over-year. Roger, understanding that there will always be one-off investments that need to be made. Analysts: Bob Napoli — William Blair — Analyst. And finally, capital and liquidity both remained strong. Good morning. Welcome to today's call. 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. In the quarter, we had $1.3 billion to the allowance, primarily due to further deterioration in the macroeconomic outlook. Moving to Slide 9. It feels like we're gaining share in the card business in terms of loans and sales this quarter from what I've seen from competitors' reporting. So the point there is that, there is not an abundance of activities or a massive jump in any sorts of activities there that's impacting delinquencies. Our next question comes from the line of Kevin Barker of Piper Sandler. demonstrating the strength of our prime revolver customer base. So we'll, we'll continue to kind a test that. Discover Financial Services (DFS) reports earnings on 1/20/2021. In conclusion, this quarter, our business generated high returns as we remain focused on disciplined credit management, profitable growth and an industry leading customer experience, supported by our 100% US-based customer service. 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. Is that right? -EPS: … But in terms of timing, little bit cautious on that one. We saw sales down 16% and 3% lower card loans, while down year-over-year both compared favorably versus other issuers, principally due to our greater concentration in every day and online spend categories, as opposed to T&E. Credit performance remained very strong in the third quarter. Just the jobless claims 787,000 this morning, big improvement, but ridiculously high report of that sort. I think we are leveraging that position of strength. So, we like the fact that our portfolio has a high concentration of credit cards. Just to give us a sense of how much your deposit funding on average could compress? And good morning, everyone. So just -- one thing on the receivables growth. Fraud is one of the areas where we're deploying advanced analytics and next generation modeling and leveraging additional information sources. Discover credit cards are built to give you great rewards and the service you deserve, from our flagship cashback credit card to our flexible travel credit card. And the decision will be subject to two factors: one, the amount of liquidity we have on the balance sheet. To date, we enrolled a total of $3.4 billion of card loans. Thank you, Maria. 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? We assumed an annualized real GDP decline of 30% quarter-over-quarter, or down 10% on a year-over-year basis. Thanks. We have continued to fund our quarterly dividend at $0.44 per share. The payment programs, we saw, obviously, the disclosed level of entries into the programs and then a surprisingly high number from our perspective exiting after one payment, which to me was a good sign. So, the migration out of branch to digital channels, which again as always been part of our business model. This scenario to which we gave the greatest way [Phonetic] included a sharp increase in peak unemployment to a rate of 16% recovering to 11% at the end of 2020, followed by a slow recovery over the next few years. Any outsized amount of liquidity on your balance sheet. And we also think that we'll come near the top on the payment prioritization through even a tough, tough downturn. Our preliminary stress capital buffer was set at 3.5% with the final SCB expected toward the end of the third quarter. Credit Card. Market data powered by FactSet and Web Financial Group. So, we've been pleased with how -- actually how the balance sheet has come together. And then the other part is the, only major issue was no fees on any of our card products. So thanks for the question, Bill. Likewise, Betsy. That's consistent with what we've seen over the last decade plus from you guys. And how significant the change in the environment, would there have to be for you guys to have to build reserves again. Roger, clearly there's nothing that we see within the credit metrics that suggests weakness outside of the headlines on potential white collar layoffs. So in terms of fraud, it doesn't reflect any renegotiations with any of our merchant partners. Clearly, the year changed dramatically. So we don't expect there to be a rush of white-collar unemployment, but what will be clear and we've seen some of this already is businesses are sizing both their professional staff and the blue collar staff for the business at hand. I think over the long-term, what you've seen is really an acceleration of some trends that were already there. We will determine our share repurchase and dividend actions subject to the final stress capital buffer, any other regulatory limitations and Board approval. [Operator Instructions] Thank you. 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. Discover Financial Services. I'm not going to get into the details. So, those are really some trends that have been there, but have accelerated in a very significant way as a result of the COVID pandemic. I'll pass to John to talk a bit about the reserve, yes. So, there was a bit of a mix shift to some products with lower fees and rates. Okay. We -- our underwriting standards have tightened mildly through this and it's positioned pretty well and open for business. And then I would just add in terms of the other expense line. One quarter ago, Discover Financial Services (NYSE:DFS) CEO David Nelms announced that earnings per share of $1.35 was a record result for … Looking at slide seven. In terms of overall kind of mix of those, I would expect the broker channel to continue to contract a bit and the direct channel expand. Thanks, Craig, and thanks to our listeners for joining today's call. Good morning. So I'll talk about the credit outlook and then handle the mortgage question on the back end. While I am pleased with our execution in the second quarter, we remain in a very challenging environment with considerable uncertainty as our country continues to struggle to stop the spread of COVID-19 and the impact on our economy remains very significant. Can you maybe just talk about some of the puts and takes from here. Returns as of 12/27/2020. Roger, so you've been with Discover long time. Discover Financial Services (NYSE: DFS) today reported a net loss of $61 million or ($0.25) per diluted share for the first quarter of 2020, as compared to net income of $726 million or $2.15 per diluted share for the first quarter of 2019. In March, we suspended our share buyback program in response to the economic environment at that time and it remains suspended. Yeah. Credit performance remains stable but some deterioration is expected in the coming quarters. Discover Financial Services plans to report its second quarter 2020 results after the market closes on Wednesday, July 22, 2020. Marketing and business development expense was down $90 million or 39%. 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. And if you look at the other expenses in the expense base, it looks like the acceptance incentives came down, as well as fraud, even though we're kind of in this more online environment. 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. We've continued to support impacted customers with our Skip-a-Pay program. 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. Just first off, on the outlook for growth. So, since the pandemic, just to give you some details, we decreased our online savings by about 60 basis points. And does that feed into your reserve analysis as well? Since its inception in 1986, the company has become one of the largest card issuers in the United States. I would say that in terms of overall volume it was up 16% year-over-year, at least for PULSE and certainly we are happy about that. But again, I think you can expect to see the continued expense discipline that I think has always been a hallmark here at Discover, our overall lower cost operating model. The forbearance programs have acted exactly as we had hoped, they've helped some customers manage through the pandemic. There had been a lot of consternation around booming credit headwinds in the TDR portfolio. The -- in terms of the government programs, we did nothing in our modeling to reflect what's been kicked around right now in Washington in terms of the next round of stimulus. I really appreciate it. Now in terms of the mortgage forbearance. Compare credit cards to find which offer is right for you.. And thanks to our listeners for joining today's call. I am sure most, if not all of you, have interacted with Craig over that time and enjoyed a great relationship with him. And so, things like permanent unemployment, there -- you need to adjust to that. The Earnings Whisper Score gives the statistical odds for the stock ahead of earnings. Thank you. Card charge-offs increased 41 basis points from the prior year, mainly due to seasoning of loan growth. 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. (RTTNews) - Below are the earnings highlights for Discover Financial Services (DFS):-Earnings: -$368 million in Q2 vs. $753 million in the same period last year. But my expectation is that, we continue -- that we are and we will continue to get more efficient in overall information processing and technology spend. So we will -- we're going to monitor the portfolio, but just to kind of net it for you and the other folks on the call, '20 looks super solid, '21 level of uncertainty, and we expect the bubble to push through into certainly beginning maybe in the mid-point of the year, end of the second half of '21. 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 just wanted to -- I was hoping you could give some thoughts on what you feel are going to be permanent changes to the industry. So there is no change to that. So, what we have seen in terms of customers exiting is a -- about 80% of those customers are making payments and close to 80% of those are making full payments. Nevertheless, I feel like we were very, very well positioned for this going in. So, John, I think in your prepared remarks, you commented that you're looking for additional efficiencies. Thanks for the question. Our capital position, combined with advances in analytics and credit risk management, put us in great shape to return to profitable growth when conditions are right. 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. Okay. Have a good day. But, yet as you attribute the revenue decline in both of those businesses. Our next question comes from the line of Rick Shane of JP Morgan. And so, when you think about your expectation for unemployment at 11% by year-end and where we are and the idea of a white collar rush of unemployment, that would be quite the rush of white-collar unemployment versus the amount of people that are unemployed now versus a steady state. Specifically, I was looking at -- it looks like your volumes are growing pretty nicely in both PULSE and Network Partners. Yeah. So, as I said earlier, the books held up really, really well, delinquency levels have come down. While the overall portfolio performance has been stable through the second quarter, we do expect to see some deterioration in consumer credit in coming quarters. And Sanjay, in terms of reserving, we modeled a number of different assumptions that took a conservative approach across the board. So, it was actually a combination of two things. So first having been here for over 20 years, I have to maybe disagree with the phrase chronic under investment. In the early stages of the pandemic, there was a substantial difference and the market took care of that and narrowed the gap. Discover Financial Services (NYSE:DFS) Q3 2020 Earnings Conference Call October 22, 2020 8:00 AM ET. Since then we've seen steady improvement across almost every category as the economy reopened. So we want to keep the broker CD channel open. Yeah, thanks. I guess, my question is on the reserve build. Consumer deposits are now nearly 60% of total funding and we have reduced our online savings rate 59 basis points since early March. And kept our marketing spend sort of appropriate for the environment and for our somewhat narrowed credit box with the changes we made earlier in the year. Please refer to our notices regarding forward-looking statements that appear in today's earnings press release and presentation. Our net interest margin bottomed out in the second quarter and improved 38 basis points to 10.19% in the current quarter. 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. In our student loan business, originations in the peak season were down year-over-year, reflecting the large number of students who chose not to enroll this fall. While total revenue was down from last year, reflecting the slowdown in the economy. 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. While significant uncertainty remains as to the extent and timing of a recovery, we were pleased to see the return to year-over-year sales growth in September. Your next question comes from the line of Moshe Orenbuch with Credit Suisse. We're also responding to shifts in consumer preferences with our investments in contactless and Secure Remote Commerce. And the absolute quantum of that will obviously depend on all the factors that we built into our reserve calculation, GDP, unemployment, new-jobless claims stimulus or lack thereof. On Slide 4 looking at key elements of the income statement. I would say that, if the economic environment continues to improve, it's natural that we're going to spend more money on customer acquisition in order to drive profitable growth into the future. Sorry, I can't be more specific than that at this point. I'd point you, we're seeing great strength on the other side of the balance sheet on the deposit side, where we compete the same way, right? 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. The traditional links between unemployment and delinquency and charge-offs, we're trying to model that. 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. 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. I will now turn the call over to Mr. Craig Streem, Head of Investor Relations. Is there a specific number in terms of the amount of benefit from the forbearance impact? While we saw very strong credit performance this quarter, we expect to see deterioration in the coming quarters as the prime consumer may be impacted by increasing permanent white collar unemployment. 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. Okay. Oct 21, 2020 4:55PM EDT (RTTNews) - Discover Financial Services (DFS) announced a profit for its third quarter that increased from last year. And then we also talked about inactive lines and taken inactive lines down nearly, to pick a number, close to $70 billion. Discover Financial Services (NYSE: DFS) plans to report its second quarter 2020 results after the market closes on Wednesday, July 22, 2020. With the backdrop of an uncertain, but improving macroeconomic environment we modeled several different scenarios and maintained a conservative view in the quarter. The question I have is just around the reserving level. And so, we will have to adjust our strategies accordingly. Please refer to our notices regarding forward-looking statements that appear in today's earnings press release and presentation. So that -- that will be our focus. Just hoping to get a little more color there. I'd say maybe one of the big differences versus the neobanks is perhaps a different focus around profitability. Relative to the second quarter, NIM increased primarily due to favorable consumer deposit pricing. As they exited, the payment percentage or payment rate of those customers has held up very, very strong. Right. In terms of trajectory of both delinquencies and charge-offs. Kevin Barker -- Piper Sandler & Co. -- Analyst. Approximately two-thirds of our consumer deposits are indeterminate maturity accounts, primarily savings, which has provided an immediate benefit from deposit rates decreases. Great. Okay. And my name is Crystal, and I will be your conference operator today. Great. So, we're looking at the impacts as very, very mild. I will now turn the floor back over to Craig Streem for any additional or closing remarks. Our strong customer service and collection efforts DFS incurred first-quarter 2020 adjusted loss of 25 cents per share stress. Has changed over time volume discover financial services earnings as I said earlier, the amount of uncertainty. 'Re available, get back to our notices regarding forward-looking statements that are subject a... Revenue was driven by marketing expenses and are continuing to invest in core so. Nevertheless, I mean, these are the times where you can how. 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