發現金融 (DFS) 2024 Q1 法說會逐字稿

Good morning. My name is Todd, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter 2024 Discover Financial Services Earnings Conference Call. (Operator Instructions).

早安.我叫托德，今天我將擔任你們的會議操作員。在此，我歡迎大家參加 2024 年第一季 Discover Financial Services 收益電話會議。 （操作員說明）。

Please note, there will be no question-and-answer period after this morning's prepared remarks. After the call ends, questions should be directed to the Discover Investor Relations team.

請注意，今天上午準備好的發言之後將不再有問答時間。通話結束後，問題應提交給 Discover 投資者關係團隊。

(Operator Instructions) I will now turn the call over to Mr. Eric Wasserstrom, Senior Vice President of Corporate Strategy and Investor Relations. Please go ahead.

（操作員指示）我現在將電話轉給公司策略和投資者關係高級副總裁 Eric Wasserstrom 先生。請繼續。

Thank you, and welcome to this morning's call. I'll begin by referencing Slides 2 and 3 of our earnings presentation, which you can find in the financial section of our Investor Relations website investorrelations.discover.com.

謝謝您，歡迎參加今天早上的電話會議。我會先引用我們收益簡報的投影片 2 和 3，您可以在我們的投資人關係網站 Investorrelations.discover.com 的財務部分找到這些投影片。

Our discussion today contains certain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our notices regarding forward-looking statements that appear in our first quarter 2024 earnings press release and presentation as well as the risk factors detailed in our annual report and other filings with the SEC.

我們今天的討論包含某些前瞻性陳述，這些陳述存在風險和不確定性，可能導致實際結果出現重大差異。請參閱我們關於 2024 年第一季財報新聞稿和簡報中出現的前瞻性陳述的通知，以及我們向 SEC 提交的年度報告和其他文件中詳細說明的風險因素。

Our call today will include remarks from our Interim CEO, Michael Shepherd; and John Greene, our Chief Financial Officer. There will be no question-and-answer session following today's remarks. However, the Investor Relations team will be available for any inquiries.

我們今天的電話會議將包括我們的臨時執行長 Michael Shepherd 的演講；和我們的財務長約翰·格林。今天的演講之後將不會舉行問答環節。不過，投資人關係團隊將隨時解答任何問題。

It's now my pleasure to turn the call over to Michael.

現在我很高興將電話轉給麥可。

Thank you, Eric, and good morning, everyone. Thank you all for joining today's call. I'd like to begin the call with a few words of introduction. I joined Discovery's Board in August of 2023 after a career in the public and private sectors, more than 30 years of which were in the financial services industry.

謝謝你，艾瑞克，大家早安。感謝大家參加今天的電話會議。我想在通話開始時做一些介紹。我於 2023 年 8 月加入 Discovery 董事會，此前我在公共和私營部門工作了 30 多年，其中在金融服務業工作了 30 多年。

Among other roles, I served as Senior Deputy controller of the currency earlier in my career. Most relevant to my current position, I was Chairman and CEO of Bank West Corporation and Bank of the West. As Chairman of Bank of the West, I helped oversee its acquisition and integration into the Bank of Montreal in 2023. I hope my experience will help me serve our shareholders, customers and employees as an effective leader during this important period. John Greene will discuss the results of the first quarter in greater detail, but let me highlight a few aspects of our financial performance.

在我的職業生涯早期，我曾擔任過貨幣高級副總監等職務。與我目前的職位最相關的是，我曾擔任 Bank West Corporation 和 Bank of the West 的董事長兼執行長。身為西方銀行董事長，我幫助監督了該銀行於2023 年的收購併併入蒙特利爾銀行。 。約翰·格林將更詳細地討論第一季的業績，但讓我強調一下我們財務表現的幾個方面。

Discover's operating performance remained solid with increased revenues in the period, driven by good loan growth, largely reflecting payment rate normalization and a resilient net interest margin. We are seeing receivables expansion while remaining prudent in our underwriting and disciplined in customer acquisition. Credit continues to perform in line with our expectations and delinquency formation has stabilized as we had anticipated.

在貸款良好成長的推動下，Discover 的經營績效保持穩健，期內收入增加，主要反映了支付率正常化和有彈性的淨利差。我們看到應收帳款在擴大，同時在承保方面保持謹慎，並在客戶獲取方面保持嚴格。信貸表現持續符合我們的預期，拖欠形成也如我們預期的那樣穩定下來。

Importantly, we continue to strengthen our risk management and compliance programs where we are investing in meaningful resources. In the first quarter, following continuing internal reviews, and after extensive discussions with several constituencies, including merchants and regulators, Discover decided to significantly increase our liability for the card misclassification issue. We believe that taking this action will advance the resolution of these issues. There's been a lot of change at Discover over the last few months and I thought it might be helpful to emphasize our framework for decision-making.

重要的是，我們繼續加強風險管理和合規計劃，投資有意義的資源。在第一季度，經過持續的內部審查，並與包括商家和監管機構在內的多個群體進行廣泛討論後，Discover 決定大幅增加我們對卡片錯誤分類問題的責任。我們相信，採取這項行動將推動這些問題的解決。在過去的幾個月裡，Discover 發生了許多變化，我認為強調我們的決策框架可能會有所幫助。

Our goals are to maximize shareholder value by executing on our risk management and compliance priorities, sustaining our commitment to outstanding customer service and seeing that the company remains well positioned to drive long-term value creation. As the interim CEO of Discover, I'm committed to these objectives, which will improve our company and allow us to make the strongest contribution to the combined Capital One.

我們的目標是透過執行風險管理和合規優先事項、維持我們對卓越客戶服務的承諾並確保公司保持良好的地位來推動長期價值創造，從而實現股東價值最大化。作為 Discover 的臨時首席執行官，我致力於實現這些目標，這將改善我們的公司，並使我們能夠為合併後的第一資本做出最大的貢獻。

The Capital One team is leading the integration planning process and we look forward to partnering with our colleagues in support of our shared objectives. The process has achieved the first important milestone, the submission of the merger applications to the Federal Reserve and the OCC. We continue to believe that the strategic rationale, operating scale and economics of the combined company are compelling. The merger will advance the company's shared mission to help our customers meet their financial goals, support our commitments to our communities and make the combined company a well-positioned bank and a competitive payments network of the future.

第一資本團隊正在領導整合規劃流程，我們期待與我們的同事合作，支持我們的共同目標。該流程已實現第一個重要里程碑，即向聯準會和 OCC 提交合併申請。我們仍然相信合併後公司的策略性原理、營運規模和經濟效益令人信服。此次合併將推進公司的共同使命，即幫助我們的客戶實現他們的財務目標，支持我們對社區的承諾，並使合併後的公司成為一家定位良好的銀行和具有競爭力的未來支付網絡。

Finally, I'd like to thank Michael Rhodes for his leadership through an important phase. His new position allows him to fulfill his career goal of leading a public company and my colleagues and I wish him well.

最後，我要感謝邁克爾·羅茲 (Michael Rhodes) 在這一重要階段的領導。他的新職位使他能夠實現領導一家上市公司的職業目標，我和我的同事們祝他一切順利。

With that, I'll now ask John Greene to review our first quarter 2024 financial results.

現在，我將請 John Greene 審查我們 2024 年第一季的財務表現。

Thank you, Michael, and good morning, everyone. I'll start with our summary financial results on Slide 5. In the quarter, we reported net income of $308 million, which was down 68% from the prior year quarter impacting our operating results was a $799 million increase to our reserve for remediation related to the card misclassification issue. The decision to increase the reserve was based upon, among other factors, the company's experience to date with remediation efforts, regulatory dialogue and our pending merger with Capital One. As Michael indicated, we believe this action is aligned with our compliance and risk management objectives and will significantly help advance the resolution of this issue.

謝謝你，邁克爾，大家早安。我將從投影片 5 上的財務業績摘要開始。卡錯誤分類問題。增加準備金的決定是基於公司迄今為止在補救措施、監管對話以及我們即將與第一資本合併方面的經驗等因素。正如麥可所指出的，我們相信這項行動符合我們的合規和風險管理目標，並將極大地幫助推動這個問題的解決。

Our core financial performance remains strong. Key highlights for the quarter include double-digit revenue expansion from loan growth, a resilient net interest margin, strong consumer deposit growth and credit performance consistent with our view that losses will peak and plateau in mid to late 2024. Excluding the card misclassification remediation reserve increase, we would have reported net income of approximately $915 million, EPS of about $3.50 per share and an efficiency ratio under 36%. These figures indicate a strong start to 2024.

我們的核心財務表現依然強勁。本季的主要亮點包括貸款成長帶來的兩位數收入擴張、富有彈性的淨利差、強勁的消費者存款成長和信貸表現，這與我們的觀點一致，即損失將在2024 年中後期達到高峰並趨於穩定。這些數字表明 2024 年有一個良好的開局。

Let us review the details beginning on Slide 6. Our net interest margin ended the quarter at 11.03%, down 31 basis points from the prior year and up 5 basis points sequentially. On a quarter-over-quarter basis, expanding loan yields from a lower card promotional balance mix and payment rate moderation were partially offset by higher net funding costs. Receivable growth is slowing from its peak in the first quarter of 2023, but continues to be strong.

讓我們回顧一下從投影片 6 開始的詳細資訊。從季度環比來看，較低的信用卡促銷餘額組合和適度的支付利率所帶來的貸款收益率的擴大被較高的淨融資成本所部分抵消。應收帳款成長較 2023 年第一季的高峰有所放緩，但仍保持強勁。

Card receivables increased 11% year-over-year due to a lower payment rate and contribution from prior year new account growth. The payment rate declined about 20 basis points from the sequential quarter and is now about 70 basis points above 2019 levels. Discover card sales were down 1% compared to the prior year quarter. Sales slowed across categories with the largest decline occurring in the everyday category, which includes supermarkets, gas and wholesale clubs. While we continue to add new accounts, in general, we are seeing card members spend less, particularly among lower-income households, which are most impacted by the cumulative effects of inflation.

由於付款率較低以及上一年新帳戶成長的貢獻，卡片應收帳款年增 11%。支付率較上一季下降約 20 個基點，目前比 2019 年水準高出約 70 個基點。 Discover 卡銷售額與去年同期相比下降了 1%。各類別銷售均放緩，其中日常品類銷售額下降幅度最大，其中包括超市、加油站及批發俱樂部。雖然我們繼續增加新帳戶，但總的來說，我們發現持卡人的支出減少了，特別是低收入家庭，他們受通貨膨脹累積效應的影響最大。

Based on trends in the period, we expect sales to be flat to slightly negative this year. Personal loans were up 21%, driven by continued strength in originations and lower payment rates versus the prior year. We are seeing strong uptake on our offering as higher interest rates in card can make debt consolidation more appealing for some consumers. Approximately 50% of our first quarter originations and personal loans were utilized for debt consolidation with disbursements primarily made directly to creditors.

根據這段期間的趨勢，我們預計今年的銷售額將持平或略有下降。個人貸款成長了 21%，原因是發放量持續強勁，且還款率較前一年下降。我們看到我們的產品受到了強烈的歡迎，因為更高的信用卡利率可以使債務合併對某些消費者更具吸引力。我們第一季發放的貸款和個人貸款中約 50% 用於債務合併，主要直接支付給債權人。

Student loans were flat year-over-year. As previously announced, we stopped accepting applications for new student loans on February 1. We formally launched the sales process in mid-March and several thousand potential buyers have provided an initial indication of interest. We continue to anticipate strong demand and still target a closing date late in the third quarter or fourth quarter. Average deposits were up 18% year-over-year and 4% sequentially.

學生貸款較去年同期持平。正如先前所宣布的，我們於 2 月 1 日停止接受新的學生貸款申請。我們繼續預期需求強勁，並仍將截止日期定在第三季末或第四季。平均存款年增 18%，季增 4%。

Our direct-to-consumer balances grew $3 billion in the period. We have started to decrease pricing on our deposit products ahead of any potential moves in reference rates. This is consistent with our practice of leading the industry on pricing in the down part of the cycle and this action contributed to our strong NIM performance in the quarter.

在此期間，我們的直接面向消費者的餘額增加了 30 億美元。在參考利率出現任何潛在變動之前，我們已開始降低存款產品的定價。這與我們在周期下行階段引領業界定價的做法是一致的，這一行動為我們本季強勁的淨利差表現做出了貢獻。

Looking at other revenue on Slide 7. Noninterest income increased $113 million or 19%. This was primarily driven by higher net discount and interchange revenue, an increase in loan fee income and higher transaction processing revenue from our PULSE business. PULSE continued to grow at a healthy clip as debit volume increased by $13.8 billion or 21% year-over-year. Our rewards rate was 139 basis points in the period, a decrease of 2 basis points versus the prior year quarter.

檢視投影片 7 的其他收入。這主要是由於淨折扣和互換收入增加、貸款費用收入增加以及 PULSE 業務交易處理收入增加所致。 PULSE 持續健康成長，借記額年增 138 億美元，成長 21%。期內我們的獎勵率為 139 個基點，比去年同期下降 2 個基點。

The decline reflects lower cash back match from slowing new account growth and the active management of our 5% categories. Prior to reviewing expenses, I would like to briefly comment on the CFPB late fee proposal. We continue to closely monitor the legal process around the proposal. If the rule were to be implemented, on an annualized basis, we estimate a pretax reduction of around $600 million or approximately 4% of revenues.

這一下降反映出新帳戶成長放緩以及我們對 5% 類別的積極管理導致現金返還匹配減少。在審查費用之前，我想先簡單評論一下 CFPB 滯納金提案。我們將繼續密切關注該提案的法律程序。如果該規則得以實施，我們預計稅前將減少約 6 億美元，即收入的 4% 左右。

Moving to expenses on Slide 8. Total operating expenses were up $926 million or 67% year-over-year. As mentioned, the predominant driver of this growth was the increase to our remediation reserve. Absent this, our expenses would have increased 9% year-over-year.

轉向幻燈片 8 上的支出。如前所述，這種成長的主要驅動力是我們的補救儲備的增加。如果沒有這一點，我們的開支將比去年同期增加 9%。

Looking at our major expense categories. Compensation costs increased $46 million or 7% due to an increase in business technology resources and severance related to organizational changes including the wind down of our student loan business.

看看我們的主要費用類別。由於業務技術資源的增加以及與組織變革（包括學生貸款業務的結束）相關的遣散費的增加，薪酬成本增加了 4,600 萬美元，即 7%。

Professional fees were up $60 million or 26%, driven by continued investments in compliance and risk management initiatives, higher recovery fees and merger-related expenses. Information processing increased due to technology investments. Our expectation for compliance and risk management expenses for the year excluding remediation-related costs, remains in the $500 million range with an upside bias.

由於對合規和風險管理計劃的持續投資、更高的追償費用和合併相關費用，專業費用增加了 6,000 萬美元，即 26%。由於技術投資，資訊處理增加。我們對今年合規和風險管理費用（不包括補救相關成本）的預期仍保持在 5 億美元的範圍內，並存在上行傾向。

Moving to credit performance on Slide 9. Total net charge-offs were 4.92%, 220 basis points higher than the prior year and up 81 basis points from the prior quarter. In Card, as we anticipated, delinquency formation is improving as more recent vintages season. The 30-plus day delinquency rate was down 4 basis points versus the prior quarter. From a vintage perspective, our 2023 card vintages performing relatively in line with our 2022 vintage. Both vintages remain profitable and above our return thresholds. This performance has been contemplated in our full year net charge-off guidance. We executed some incremental tightening during the first quarter, which will influence our new account growth for the year.

轉向投影片 9 的信貸表現。在卡德，正如我們預期的那樣，隨著最近年份的到來，拖欠率正在改善。 30 多天的拖欠率比上一季下降了 4 個基點。從年份角度來看，我們 2023 年卡牌年份的表現與 2022 年年份相對一致。兩個年份都保持獲利並且高於我們的回報門檻。我們的全年淨沖銷指引中已經考慮到了這一表現。我們在第一季執行了一些增量緊縮政策，這將影響我們今年的新帳戶成長。

Personal loan net charge-offs were 4.02%, 208 basis points higher than the prior year and up 63 basis points from the prior quarter. We expect losses in this product to trend higher in the near term before plateauing beginning late this year or into 2025.

個人貸款淨核銷率為4.02%，較上年同期上升208個基點，較上季上升63個基點。我們預計該產品的損失在短期內將呈上升趨勢，然後在今年年底或 2025 年開始趨於穩定。

Turning to the allowance for credit losses on Slide 10. Our credit reserve balances declined $25 million from the prior quarter and our reserve rate increased by 9 basis points to 7.32%. The reserve rate increase was primarily driven by the reduction of seasonal transactor balances in the quarter. Given our expectation for total company losses to peak and plateau in mid to late 2024, we believe the credit reserve rate is likely at or near peak levels, assuming a stable macroeconomic environment and no significant unexpected changes in portfolio performance.

轉向幻燈片 10 上的信貸損失準備金。準備金率上漲主要是因為本季季節性交易者餘額減少所致。鑑於我們預期公司總虧損將在 2024 年中後期達到高峰並趨於穩定，我們認為，假設宏觀經濟環境穩定且投資組合表現沒有重大意外變化，信貸準備金率可能會達到或接近峰值水準。

Looking at Slide 11. Our common equity Tier 1 for the period was 10.9%, down 40 basis points sequentially. The impacts from the increase in expenses in the CECL phase-in were offset by lower receivables and core earnings generation. We declared a quarterly cash dividend of $0.70 per share of common stock.

請看投影片 11。 本期間我們的普通股一級資本率為 10.9%，較上一季下降 40 個基點。 CECL 逐步實施帶來的費用增加的影響被應收帳款和核心獲利的減少所抵銷。我們宣布季度現金股利為每股普通股 0.70 美元。

Concluding on Slide 12. We have made the following updates to our 2024 outlook. We are increasing our loan growth expectations to up low single digits. This primarily reflects our expectation of further decline in the payment rates, offsetting our view of flat to slightly negative sales growth this year and a modest contribution from new accounts. We are increasing our net interest margin range to 10.7% to 11%. This change was driven by 2 factors: first, the forward curve now reflects an expectation of 2 rate cuts this year versus our prior forecast of 4 cuts.

投影片 12 結束。我們將貸款成長預期上調至較低的個位數。這主要反映了我們對付款率進一步下降的預期，抵消了我們對今年銷售成長持平或略有負成長以及新帳戶貢獻不大的看法。我們將淨利差範圍提高至 10.7% 至 11%。這項變化是由兩個因素驅動的：首先，遠期曲線現在反映了今年將降息 2 次的預期，而我們之前預測為 4 次降息。

And second, we have been proactive in lowering our deposit rates. Our cumulative deposit beta is now about 70% and we think there will be further opportunities to manage our deposit costs over the course of this year.

其次，我們一直積極主動降低存款利率。我們的累積存款貝塔值目前約為 70%，我們認為今年將有更多機會來管理我們的存款成本。

We still expect our core operating expenses to be up mid-single digits, excluding card misclassification related costs and merger expenses. Our core operating expense trends are in line with our expectations and we believe the actions we took in the first quarter have substantially de-risked the probability of further increases to the remediation reserve.

我們仍預期我們的核心營運支出將成長中個位數，不包括卡片錯誤分類相關成本和合併費用。我們的核心營運費用趨勢符合我們的預期，我們相信我們在第一季採取的行動已大大降低了進一步增加補救準備金的可能性。

We are tightening our net charge-off range to 4.9% to 5.2%, based largely on current delinquency trends. Our base case remains at the lower end of the range. Finally, given the merger agreement, we have suspended share repurchases through closing and agreed not to increase the dividend. To summarize, we continue to generate solid results and our financial performance underscores our steady stewardship of the organization as we move towards resolving compliance items and consummating our planned merger. This concludes our remarks. I'll turn the call back over to our operator.

我們主要根據目前的拖欠趨勢，將淨沖銷範圍收緊至 4.9% 至 5.2%。我們的基本預測仍處於該範圍的下限。最後，根據合併協議，我們已暫停透過交割進行股份回購，並同意不增加股利。總而言之，隨著我們朝著解決合規問題和完成計劃合併的方向邁進，我們繼續取得紮實的成果，我們的財務表現突顯了我們對組織的穩定管理。我們的發言到此結束。我會將電話轉回給我們的接線生。

Thank you. This concludes today's call. The Discover Investor Relations team will be available for questions. Thank you for joining. You may now disconnect.

謝謝。今天的電話會議到此結束。 Discover 投資人關係團隊將隨時回答問題。感謝您的加入。您現在可以斷開連線。