Turning now to slide nine, showing credit metrics. On the liability side, we've seen great appetite on our -- for our deposit products, which is positive. Okay. So, the -- overall the industry, the quality of the originations is much better today than it was at the Great Recession or prior to that. Thanks for the question. Stock Advisor launched in February of 2002. We expect these investments to strengthen our ability to achieve profitable growth and shareholder value through improved targeting and personalization, better underwriting decisions and enhanced collection strategies, just to name a few of the benefits. And in terms of gaining share, I think it's never too early to think about that. So -- yeah. I certainly would caveat that and say that consumer behavior is really difficult to predict here in a time such as this. 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. But overall, as I look at where we are today and based on our underwriting and where a card loan comes into payment priorities, I feel like we're very, very well positioned versus where the Company was coming into the Great Recession. And you've got this really high savings rate going on right now. But overall, as you look at where we are this quarter, I see some upside from that from my vantage point today. So we'll look at it, but I think we're probably more likely to be aggressive on the organic side subject to our conservative credit policy than making acquisitions. Your next question comes from the line of Bob Napoli with William Blair. Sales volume turned positive in September and net interest margin expanded nicely. A conference call to discuss the firm's results, outlook and … Credit performance remains stable but some deterioration is expected in the coming quarters. Thanks so much for taking my question. I think usually you guys are in the mid teens or somewhere in that range. Since then we've seen steady improvement across almost every category as the economy reopened. Good morning. I would say, until the environment improves, it's quite safe to expect continued heavy regulatory focus on return of capital. So we're comfortable with that. I will now turn the call over to Mr. Craig Streem, Head of Investor Relations. The majority of the expense reduction was in brand marketing and card acquisition costs as we aligned marketing spend with the impacts of the economic environment and tightened credit criteria. I really appreciate it. As we move toward our targeted 70% to 80% of funding from consumer deposits, we expect to see continued benefits to net interest margin. 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. And so, a lot of what we're seeing are opportunities for either investments, partnership. If you look at the breadth from home equity to a broad range of deposit products, including checking or debit accounts, great strength, of course, on the card side personal loans. [Operator Instructions] Your next question comes from the line of Mark DeVries with Barclays. I think -- I believe a majority of your customers have mortgages. I know typically it's a function of account growth and balances per account and obviously you've had some shrinkage recently because of the spend levels that we all know about. Clearly, the year changed dramatically. That's an immediate benefit to net interest margin in the Company. And as I said earlier, we're going to be mindful in terms of those sorts of decisions. At this time, I would like to welcome everyone to the Third Quarter 2020 Discover Financial Services Earnings Conference Call. And that's within the significantly tightened credit box that we have. Shares are up 32.9% since reporting last quarter. What COVID has meant to account growth, how you flexed? Gross discount and interchange revenue decreased 18% driven by the decline in sales volume. The timing of the rise in delinquency and subsequent losses could be impacted if there is a second government stimulus program or economic trends shift materially. Discover Financial Services (NYSE:DFS)Q2 2020 Earnings CallJul 23, 2020, 8:00 a.m. I'd like to turn the floor back over to Craig Streem for any additional or closing remarks. demonstrating the strength of our prime revolver customer base. Thank you. Yeah. So, sorry, I can't be -- yeah. In general, higher FICOs across every single form of lending product. Net interest margin was 9.81% for the quarter, down 66 basis points from the prior year. Total card sales volume decreased 16% in the second quarter. 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. Okay. Sounds good. I know you already addressed one question on that earlier in the Q&A. Thank you. Your next question comes from the line of Moshe Orenbuch with Credit Suisse. I will now turn the call over to Mr. Craig Streem, Head of Investor Relations. Mark DeVries -- Barclays Capital -- Analyst. We took swift action on expenses and are continuing to invest in core capabilities so we're prepared for the recovery when it comes. Returns as of 12/27/2020. Crystal, thank you very much, and welcome everybody to our call this morning. Our next question comes from the line of Mihir Bhatia of Bank of America. Net interest income was down 6% as the impact of lower market rates was partially offset by lower funding costs. Approximately two-thirds of our consumer deposits are indeterminate maturity accounts, primarily savings, which has provided an immediate benefit from deposit rates decreases. Thank you. Discover Financial Services (DFS Quick Quote DFS - Free Report) inked a deal with Lebanon-based areeba to jointly expand their global reach. The forbearance programs have acted exactly as we had hoped, they've helped some customers manage through the pandemic. 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. 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. Nevertheless, I feel like we were very, very well positioned for this going in. 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. 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. 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. Just first off, on the outlook for growth. So you've been pleased with your account growth that you've generated over the past couple of quarters. During the Q&A session, please limit yourself to one question and if you have a follow-up please queue back in so we can accommodate as many participants as possible. Thanks. So, we like the fact that our portfolio has a high concentration of credit cards. Our next question comes from the line of Don Fandetti of Wells Fargo. The Earnings Whisper Score gives the statistical odds for the stock ahead of earnings. Moving to slide six. 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? I'd say maybe one of the big differences versus the neobanks is perhaps a different focus around profitability. Credit performance in our personal loan portfolio continue to be very strong this quarter, reflecting our disciplined underwriting and the benefit of credit actions implemented over the past several years. Now, that's what -- that's how we're seeing it today. Discover Financial Services: Earnings Beat Does Not Offset Challenges. We've been talking for a long time. Our discussion today contains certain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. And then just one quick one on the -- I was hoping that you guys operate more on the network business. 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. ET. So in terms of the stimulus that we modeled, and it is one of many inputs, and we'll look at what happens in the fourth quarter and see how the roll rates are progressing in the portfolio through the quarter to get, I'll say, a bottoms up view of actually the impact there. 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. Could you just talk about how the -- what the cycle is going to look like or how you envision it playing out with charge-offs playing out in the early '21 and then what it looks like in the back half? 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. Our common equity Tier 1 ratio increased 40 basis points sequentially, mainly due to decline in loan balances. Yeah. [Operator Instructions] Thank you. And as such the unemployment number is not exactly an easy number to predict, but we feel like as an input to our model, it's appropriate at this point. I mean, I think -- as you think about the importance of the government programs, it's less about the $1,200 check that a family gets, as you think about life of loan losses and what that will support. Yeah. So, back to work. Discover Financial Services DFS incurred first-quarter 2020 adjusted loss of 25 cents per share. And I would expect -- I mean, I guess, you're not really given where delinquencies are, you are not expecting to see charge-offs move up much in the fourth quarter and then more back half-weighted to 2021? Thank you. Our next question comes from the line of Rick Shane of JP Morgan. Thanks. Thanks. 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. But the leverage that we're going to get in future quarters will come out of the funding base. Just any thoughts on when you guys feel you would have a more clarity in terms of the economy in order to reinstate that buyback program? 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. The 30-plus delinquency rate improved 59 basis points from last year and 26 basis points from the prior quarter as credit performance of our card portfolio continued to be stable. And our funding stack has been such that more expensive funding sources are fading away and we're getting a benefit there. In the week of July 12, enrollments decreased to just $35 million. And you can see that from the broadest metric we disclosed, the 30-day delinquency rate. So, I'll let John cover the part about reserves Sanjay. And so, kind of maybe -- if some of this has been discussed already, but I'm sort of struck by that, it seems like you have an opportunity and where does -- where can you direct that attention and how much do you have in kind of available, whether it's spending on rewards or marketing, like, what are the -- what are the tools and how are you going to use them over the next few quarters, particularly, now as we're going into the holiday season. Since then we have seen steady improvement across almost every category as the economy reopened. We made good progress on the expense front in the second quarter and we'll continue this momentum through the balance of the year. That all makes sense. Card charge-offs increased 41 basis points from the prior year, mainly due to seasoning of loan growth. In addition, average receivables were down 3%, contributing to the decline in net interest income. The greatest weekly decline was in mid-April when total sales were down 33% for the week ending April 18. The trend continued through the first half of October with sales up 7%. 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. Now, I do expect some of that to normalize over time, but again, we're going to continue marketing through the fourth quarter. So, we're seeing that the portfolio continues to be really, really stable as I said. Thanks for taking my call. Yes. Yeah. And we're really, really pleased by that. Other loan products were generally flat from the prior quarter. Now, as always, it's my pleasure to turn the call over to Roger. I enjoyed the conversation -- excuse me, this morning and we're available for any follow-up questions that you may have. The quarterly reserve calculation also included an overlay, which considers the impact of the Skip-a-Pay program, leveraging our previous experience with disaster relief. Just thank you everybody for your interest. But maybe you could just talk about what will drive the impacts that you're expecting in the next few quarters in credit quality? Thank you, Maria. Maybe can you just help us understand and maybe Roger can hop in on this too. This was driven by three factors: average loans were flat year-over-year, reflecting the lower sales volume; loan yields declined as the average prime rate was 225 basis points lower on a year-over-year basis due to Fed rate cuts in 2019; and a 150 basis points cut in March of this year. So I'm very excited about where we're positioned. Obviously, there is one piece which is the health of the portfolio and that's been strong. Certainly, the mix of revolvers and transactors will also have an impact and typically impacts the fourth quarter a bit but. Bill Carcache -- Wolfe Research -- Analyst. A quick follow-up on credit. I don't see the need for expanding our products. The lower delinquency rate reflects the overall stability of the card portfolio with a very modest impact from the Skip-a-Pay program. And then just separately on credit and the outlook for credit here. And what you'll see there is, relative to the first quarter TDR volumes will be substantially down, but there is also the impact of the Care Act with the regulatory exclusion for certain modifications that banks such as ours make. And then regarding your comments on the charge-off rate peaking into late '21. Compare credit cards to find which offer is right for you.. To date, we enrolled a total of $3.4 billion of card loans. So, that's what we like to do. Offsetting this, in our Diners Club International business, we booked a $59 million non-cash intangible asset impairment charge as a result of the slowdown in cross-border travel and entertainment spending. 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 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. First-time enrollments have steadily decreased since then. Yeah. Net charge-offs improved 130 basis points and the 30-plus delinquency rate was down 39 basis points from the prior year. These credit metrics benefit from disciplined underwriting and our strong customer service and collection efforts. So I'll start with how we're expecting delinquencies and charge-offs to roll in. We entered this recession from a strong credit position due to our traditionally conservative approach to underwriting, as well as actions taken over the past few years to reduce our contingent liability and tightened credit at the margin. Okay. Specifically, I was looking at -- it looks like your volumes are growing pretty nicely in both PULSE and Network Partners. 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. So we'll, we'll continue to kind a test that. Thanks. So in terms of positioning ourselves as the leading digital bank. No, the cost there on the ABS that's reflected is net a the hedge impact. So good news on what it's doing on the deposit side of our business. Discover Financial Services (DFS) Q1 2020 Earnings Call Transcript DFS earnings call for the period ending March 31, 2020. Other income was up due to a $44 million gain on the sale of an equity investment. Now, that's subject to a lot of different things, right? Outside of a one-time item, operating expenses were down as we started to benefit from our expense reduction programs. Thank you, and good morning. Are there any specific signs that you're seeing inside the portfolio that lead you to be concerned? Since we launched this program in mid-March, we have helped over 662,000 customers across all of our products, and in fact, about 60% of total loans enrolled have already exited the program. Discover Financial Services plans to report its second quarter 2020 results after the market closes on Wednesday, July 22, 2020. As the economic environment evolve, we'll continue to monitor and take actions on expenses as conditions warrant. The improvements in sales volume continued during the quarter with a return to growth in the month of September. Yes. Yeah. 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. 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. Under CECL, as you know, right, that is reserves for the life of loan for the loans we have on our balance sheet. Stock Advisor launched in February of 2002. So we'll see, but we'll look at it through the quarter, the fourth quarter and make a call in terms of what's appropriate from a GAAP standpoint. So, if you just look at where we are as of June 30, and then just do a kind of straight rule, model it out, it's hard to see any massive increases in charge-offs for the balance of the year, even if things deteriorate from the consumer standpoint. 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. 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. Apart from the one-time impairment charge, we anticipate realizing $400 million of expense reductions from our previous guidance range. The earnings release will be available through Discover's Investor Relations website at https://investorrelations.discover.com . It'd be premature on that. And how if at all those expectations and your reserve levels are impacted by your expectations for benefits from different forms of government stimulus and different forms of lender forbearance across your customers' different financial obligations? But I think a good way to think about it is charge-offs elevating in '21, perhaps peaking in the later part of '21 depending on the economic scenario that we're dealing with and then starting to tail off in '22. The pandemic continued to have a significant impact on sales volume, as well as loan growth through the quarter. And how that's influencing your outlook for the 11% unemployment rate? These were partially offset by lower funding costs. Great. Since the onset of the pandemic, we have been a leader in reducing rates on our consumer deposit products. So, Roger, I mean, these are the times where you can potentially step in and gain share and be opportunistic. 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. Discover Financial Services Announces First Quarter 2020 Earnings Release on April 22, 2020 and Conference Call on April 23, 2020 April 01, 2020 05:30 PM Eastern Daylight Time And there is enough indications today that there could be some contraction. -EPS: … And then, frankly, just a level of uncertainty that's caused us to be cautious on a. I'd say, signing up new rich incentive deals. That's consistent with what we've seen over the last decade plus from you guys. Yeah. In particular on some of the personal loans and card rates, could you talk about the competitive environment in both of those products. It's a little challenging just to look at operating leverage, because that includes, what I'll call, sort of day-to-day corporate type expenses that we're always trying to bring down. Okay. 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. Yeah, we are seeing a -- certainly a push from '20 into '21. So, I would guide you to sort of looking back over the last 10 years where you've seen a very clear strategy from Discover, given the high returns we generate from our business, an important part of how we manage capital is returning it to shareholders in the form of a dividend and we've had historically a measured increase to those dividends, as well as buying back stock. There is a level of concern in terms of jobless claims and the impact on prime consumers. After that, we'll continue to offer assistance to those who qualify on a customer-by-customer basis. Good morning. Card net charge off dollars actually came down $7 million, while the rate increased 13 basis points. P/E Expansion Could Be In Play For Discover Financial, But I See Better Options. 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. We're not looking to substantially change any of the duration of any of the liabilities that we see on the balance sheet. We've continued to see very strong demand for our consumer deposit products, even as we have been reducing rates. Asset yields are obviously going to be improving and it seems like the funding tailwinds are sizable over the next couple of quarters. Good morning and good quarter. Our net interest margin bottomed out in the second quarter and improved 38 basis points to 10.19% in the current quarter. So I'll talk about the credit outlook and then handle the mortgage question on the back end. Thank you. Great. Thanks, Craig. Build a Credit History. Okay. 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 in terms of fraud, it doesn't reflect any renegotiations with any of our merchant partners. As a direct banking and payment services company in the United States, Discover Financial Services (DFS Quick Quote DFS - Free Report) ... On its last earnings … 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. We -- our underwriting standards have tightened mildly through this and it's positioned pretty well and open for business. Personal loan net charge-offs decreased 90 basis points year-over-year. Just wondered what your built -- what you've built into your reserves as far as the trajectory of charge-offs? I'll pass to John to talk a bit about the reserve, yes. 5. And you're seeing some little bit more resiliency on the asset yields. Contents: Prepared Remarks; Questions and Answers; Call Participants; Prepared Remarks: Operator. Hi. Discover Financial Services has confirmed Earnings date and time. Yeah. Yeah. Likewise, Betsy. Professional fees decreased $38 million or 20%, mainly driven by lower third-party recovery fees related to core closure, as well as favorable vendor pricing adjustments. How should I think about what the right reserving level is for today's book versus the losses that you had during the '08 crisis? But it is a time where consumers are rethinking which cards they want, do they really need another frequent flyer mile at this point. On Slide 4 looking at key elements of the income statement. But that is having a significant impact on loan growth for both card and personal loans. Thanks. So we're submitting our second round of stress test in November and included in there are a number of judgments. Our common equity Tier 1 ratio increased 50 basis points sequentially, primarily due to the decline in loan balances. So, we've seen a lot of controversy around the dividend on with several competitors or even some other banks. 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. But management's intent is unchanged. Yeah. Our next question comes from the line of Ryan Nash of Goldman Sachs. Yes. Is that right? But, overall, we're -- again, we're pleased with our positioning. 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. Delinquency levels coming into the recession -- this recession versus the Great Recession, are lower. Yeah. Credit performance remained very strong in the third quarter. We saw American Expressbuy Kabbage. That concludes our formal remarks, so I'll turn the turn the call back to our operator to open the phone lines for Q&A. And then we also talked about inactive lines and taken inactive lines down nearly, to pick a number, close to $70 billion. Yeah. I think a lot of the miles programs I see in the marketplace are struggling to add relevance and redemption options. 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. Thanks, Rick. Moshe Orenbuch -- Credit Suisse -- Analyst. And progressively, it will start to impact the prime revolver base. 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. 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. 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. Sales have improved across all categories with particular strength in online retail, home improvement and everyday spend categories, partially offset by continued weakness in travel and entertainment spending. If you experience any issues with this process, please contact us for further assistance. 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. Of those, out of the program, approximately 80% have returned to making payments. And so we feel good about that. And then, Roger, longer-term, coming out of the credit crisis, if I recall, you guys came out and took share and we're positioned pretty well. So we look at the card yield. Yeah. Great. Our private student loan portfolio reported strong credit metrics in the quarter with net charge-offs nearly flat to the prior year. Hey, good morning. But as you step back from it, the overall size of the portfolio versus the customers who have elected to go into Skip-a-Pay program, relatively small, right? I think over the long-term, what you've seen is really an acceleration of some trends that were already there. Please refer to our notices regarding forward-looking statements that appear in today's earnings press release and presentation. 23, 2020Corporate Participants: Craig Streem — Investor Relations. At Discover Financial Services, we promise to treat your data with respect and will not share your information with any third party. Our next question comes from the line of Dominick Gabriele of Oppenheimer. Thank you. Excluding purchased loans, the 30-plus delinquency rate improved 37 basis points from the prior year and 8 basis points sequentially. 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