Q2 2024 Discover Financial Services Earnings Call Transcript
Key Points
- Discover Financial Services (DFS) reported net income of $1.5 billion, up 70% from the prior year quarter.
- The company entered into an agreement to sell its private student loan portfolio, simplifying operations and business mix.
- Net interest margin increased to 11.17%, driven by lower card promotional balance mix and normalized receivables growth.
- Personal loans were up 13% from the prior year period, reflecting prudent underwriting adjustments.
- Average consumer deposits increased by 15% year over year, indicating strong liquidity management.
- Discover Card sales were down 3% compared to the prior year, with lower spending at restaurants impacting sales volume.
- Total operating expenses increased by 23% year over year, driven by charges for expected regulatory penalties related to card misclassification.
- Credit losses are expected to peak and plateau during the second half of 2024, indicating ongoing credit risk challenges.
- The company experienced a decline in student loans by 1% year over year, reflecting a challenging market environment.
- Professional fees increased by 37%, driven by higher recovery fees and investment in compliance and risk management.
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 Second-Quarter 2024 Discover Financial Services Earnings Conference Call. (Operator Instructions)
Thank you. I will now turn the call over to Mr. Eric Wasserstrom, Senior Vice President of Corporate Strategy and Investor Relations. Please go ahead.
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. 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 the second quarter 2024 earnings press release and presentation, as well as the risk factors detailed in our annual
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