Form 8-K Discover Financial Servi For: Jan 19
Exhibit 99.1
DISCOVER FINANCIAL SERVICES REPORTS FOURTH QUARTER 2021 NET INCOME OF $1.1 BILLION
OR $3.64 PER DILUTED SHARE AND FULL YEAR NET INCOME OF $5.4 BILLION OR $17.83 PER DILUTED SHARE
| Fourth Quarter 2021 Results | |||||||||||
| 2021 | 2020 | YOY Change | |||||||||
| Total loans, end of period (in billions) | $93.7 | $90.4 | 4% | ||||||||
| Total revenue net of interest expense (in millions) | $2,936 | $2,824 | 4% | ||||||||
| Total net charge-off rate | 1.37% | 2.38% | -101 bps | ||||||||
| Net income/(loss) (in millions) | $1,067 | $799 | 34% | ||||||||
| Diluted EPS | $3.64 | $2.59 | 41% | ||||||||
Riverwoods, IL, January 19, 2022 - Discover Financial Services (NYSE: DFS) today reported net income of $1.1 billion or $3.64 per diluted share for the fourth quarter of 2021, as compared to a net income of $799 million or $2.59 per diluted share for the fourth quarter of 2020. For the full year 2021, net income was $5.4 billion or $17.83 per diluted share, compared to $1.1 billion or $3.60 per diluted share for the full year 2020.
“Our record results in 2021 reflect the benefits of our integrated digital banking and payments model, the strength of our value proposition, and a supportive macroeconomic backdrop," said Roger Hochschild, CEO and President of Discover "It's great to see that our investments in acquisition, brand, and technology contributed to our return to loan growth this past year, and should drive accelerated growth in 2022.”
Segment Results:
Digital Banking
Digital Banking pretax income of $1.5 billion for the quarter was $467 million higher than the prior year period reflecting a lower provision for credit losses and higher revenue net of interest expense, partially offset by higher operating expenses.
Total loans ended the quarter at $93.7 billion, up 4% year-over-year, and up 5% sequentially. Credit card loans ended the quarter at $74.4 billion, up 4% year-over-year. Personal loans decreased $241 million, or 3%, and private student loans increased $159 million, or 2%, year-over-year. The organic student loan portfolio, which excludes purchased loans, increased $378 million, or 4% from the prior year period.
Net interest income for the quarter increased $106 million, or 4%, from the prior year period, driven by higher average receivables, favorable funding costs and lower interest charge-offs. Net interest margin was 10.81%, up 18 basis points versus the prior year. Card yield was 12.50%, down 15 basis points from the prior year period primarily driven by the impact of a high payment rate on revolving loan balances and a higher mix of receivables at a promotional rate, partially offset by decreased interest charge-offs. Interest expense as a percent of total loans decreased 58 basis points from the prior year period, primarily driven by proactive management of deposit costs, a favorable shift in the funding mix, lower market rates and the maturity of high coupon consumer CDs.
Non-interest income increased $129 million, or 35%, from the prior year period, mainly driven by higher discount/interchange revenue and loan fee income partially offset by higher rewards cost, which reflected elevated sales volumes.
The total net charge-off rate of 1.37% was 101 basis points lower versus the prior year period reflecting strong credit performance across the portfolio. The credit card net charge-off rate was 1.50%, down 113 basis points from the prior year period and down 15 basis points from the prior quarter. The 30+ day delinquency rate for credit card loans was 1.66%, down 41 basis points year-over year and up 18 basis points from the prior quarter. The student loan net charge-off rate was 0.80%, up 9 basis points from
the prior year and up 12 basis points from the prior quarter. Personal loans net charge-off rate of 1.21% was down 158 basis points from the prior year and up 10 basis point from the prior quarter.
Provision for credit losses of $263 million decreased $268 million from the prior year period driven by lower net charge-offs and a reserve release in the quarter. The fourth quarter of 2021 included a $39 million reserve release, compared to no change in reserves in the fourth quarter of 2020. Net charge-offs of $313 million were $218 million lower than the prior year period.
Total operating expenses were up $36 million year-over year, or 3%. The prior year quarter included $137 million of one-time expense items; excluding these, the increase primarily reflects higher marketing expense and increased professional fees.
For the full year, Digital Banking pretax income of $6.5 billion was $5.3 billion higher year-over-year primarily reflecting a $4.9 billion decrease in provision expense as the current year included $1.4 billion of reserve releases compared to $2.4 billion of reserve builds in 2020. Additionally, net charge-offs were $1.1 billion lower than the prior year. Revenue net of interest expense increased $609 million from the prior year. This was partially offset by higher operating expense.
Payment Services
Payment Services had a pretax loss of $97 million, down $121 million year-over-year. Lower revenue was driven by a $139 million unrealized loss on equity investments. This was partially offset by higher PULSE and Network Partners revenue.
Payment Services volume was $83.4 billion, up 19% year-over-year. PULSE dollar volume was up 18% year-over-year with growth across all debit products driven by increased spend related to the economic recovery. Diners Club volume was up 17% year-over-year reflecting a rebound from the impacts of the pandemic. Network Partners volume increased 29% from the prior year primarily reflecting higher AribaPay volume.
For the full year, Payment Services pretax income of $533 million was $361 million higher than the prior year reflecting an unrealized gain on equity investments and higher revenue in PULSE and Network Partners, partially offset by higher operating expenses.
Share Repurchase
During the fourth quarter of 2021, the company repurchased approximately 6.5 million shares of common stock for $773 million. Shares of common stock outstanding declined by 2.2% from the prior quarter.
Conference Call and Webcast Information
The company will host a conference call to discuss its fourth quarter results on Thursday, January 20, 2022, at 7:00 a.m. Central Time. Interested parties can listen to the conference call via a live audio webcast at https://investorrelations.discover.com.
About Discover
Discover Financial Services (NYSE: DFS) is a digital banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover card, America's cash rewards pioneer, and offers private student loans, personal loans, home loans, checking and savings accounts and certificates of deposit through its banking business. It operates the Discover Global Network comprised of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance around the world. For more information, visit www.discover.com/company.
Contacts:
Investors: Media:
Eric Wasserstrom, 224-405-5923 Jon Drummond, 224-405-1888
ericwasserstrom@discover.com jondrummond@discover.com
A financial summary follows. Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the financial supplement filed as Exhibit 99.2 to the company's Current Report on Form 8-K filed today with the Securities and Exchange Commission (“SEC”). Both the earnings release and the financial supplement are available online at the SEC's website (http://www.sec.gov) and the company's website (https://investorrelations.discover.com).
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which speak to our expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Such statements are based upon the current beliefs and expectations of the company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this press release, and there is no undertaking to update or revise them as more information becomes available.
The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: the effect of the coronavirus disease 2019 ("COVID-19") pandemic and measures taken to mitigate the pandemic, including their impact on our credit quality and business operations as well as their impact on general economic and financial markets, changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment, the levels of consumer confidence and consumer debt, and investor sentiment; the impact of current, pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions, including, but not limited to, those related to tax reform, financial regulatory reform, consumer financial services practices, anti-corruption, and funding, capital and liquidity; the actions and initiatives of current and potential competitors; the company's ability to manage its expenses; the company's ability to successfully achieve card acceptance across its networks and maintain relationships with network participants; the company's ability to sustain and grow its non-card products; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; the company's ability to manage its credit risk, market risk, liquidity risk, operational risk, compliance and legal risk, and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit markets; the impact of rating agency actions; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; losses in the company's investment portfolio; limits on the company's ability to pay dividends and repurchase its common stock; limits on the company's ability to receive payments from its subsidiaries; fraudulent activities or material security breaches of key systems; the company's ability to remain organizationally effective; the company's ability to increase or sustain Discover card usage or attract new customers; the company's ability to maintain relationships with merchants; the effect of political, economic and market conditions, geopolitical events and unforeseen or catastrophic events; the company's ability to introduce new products or services; the company's ability to manage its relationships with third-party vendors; the company's ability to maintain current technology and integrate new and acquired systems; the company's ability to collect amounts for disputed transactions from merchants and merchant acquirers; the company's ability to attract and retain employees; the company's ability to protect its reputation and its intellectual property; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. The company routinely evaluates and may pursue acquisitions of or investments in businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or the company's debt or equity securities.
Additional factors that could cause the company's results to differ materially from those described in the forward-looking statements can be found under “Risk Factors,” “Business - Competition,” “Business - Supervision and Regulation” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the company's Annual Report on Form 10-K for the year ended December 31, 2020, "Risk Factors" and “Management's Discussion & Analysis of Financial
Condition and Results of Operations” in the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, June 30, 2021 and March 31, 2021 which is filed with the SEC and available at the SEC's internet site (http://www.sec.gov) and subsequent reports on Forms 8-K and 10-Q, including the company's Current Report on Form 8-K filed today with the SEC.
| DISCOVER FINANCIAL SERVICES | Exhibit 99.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EARNINGS SUMMARY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in millions, except per share statistics) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 vs. Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | 2021 vs. 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EARNINGS SUMMARY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Income | $2,742 | $2,674 | $2,589 | $2,646 | $2,760 | ($18) | (1 | %) | $10,651 | $11,095 | ($444) | (4 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Expense | 259 | 269 | 290 | 316 | 383 | (124) | (32 | %) | 1,134 | 1,865 | (731) | (39 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Income | 2,483 | 2,405 | 2,299 | 2,330 | 2,377 | 106 | 4 | % | 9,517 | 9,230 | 287 | 3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discount/Interchange Revenue | 1,042 | 988 | 937 | 766 | 811 | 231 | 28 | % | 3,733 | 2,879 | 854 | 30 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rewards Cost | 697 | 689 | 598 | 525 | 569 | 128 | 22 | % | 2,509 | 1,946 | 563 | 29 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discount and Interchange Revenue, net | 345 | 299 | 339 | 241 | 242 | 103 | 43 | % | 1,224 | 933 | 291 | 31 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Protection Products Revenue | 36 | 43 | 43 | 43 | 45 | (9) | (20 | %) | 165 | 180 | (15) | (8 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loan Fee Income | 131 | 121 | 105 | 107 | 110 | 21 | 19 | % | 464 | 414 | 50 | 12 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Transaction Processing Revenue | 60 | 58 | 58 | 51 | 52 | 8 | 15 | % | 227 | 195 | 32 | 16 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized Gains/ (Losses) on Equity Investments | (139) | (167) | 729 | — | — | (139) | NM | 423 | — | 423 | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Realized Gains/ (Losses) on Equity Investments | 1 | — | — | — | — | 1 | NM | 1 | 80 | (79) | (99 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Income | 19 | 18 | 6 | 23 | (2) | 21 | NM | 66 | 56 | 10 | 18 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Non-Interest Income | 453 | 372 | 1,280 | 465 | 447 | 6 | 1 | % | 2,570 | 1,858 | 712 | 38 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue Net of Interest Expense | 2,936 | 2,777 | 3,579 | 2,795 | 2,824 | 112 | 4 | % | 12,087 | 11,088 | 999 | 9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for Credit Losses | 263 | 185 | 135 | (365) | 531 | (268) | (50 | %) | 218 | 5,134 | (4,916) | (96 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Employee Compensation and Benefits | 499 | 483 | 498 | 506 | 504 | (5) | (1 | %) | 1,986 | 1,894 | 92 | 5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Marketing and Business Development | 271 | 210 | 175 | 154 | 159 | 112 | 70 | % | 810 | 659 | 151 | 23 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Information Processing & Communications | 125 | 121 | 145 | 109 | 198 | (73) | (37 | %) | 500 | 540 | (40) | (7 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Professional Fees | 230 | 198 | 187 | 182 | 192 | 38 | 20 | % | 797 | 717 | 80 | 11 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Premises and Equipment | 23 | 23 | 22 | 24 | 30 | (7) | (23 | %) | 92 | 113 | (21) | (19 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Expense | 164 | 155 | 195 | 106 | 195 | (31) | (16 | %) | 620 | 596 | 24 | 4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Operating Expense | 1,312 | 1,190 | 1,222 | 1,081 | 1,278 | 34 | 3 | % | 4,805 | 4,519 | 286 | 6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income/ (Loss) Before Income Taxes | 1,361 | 1,402 | 2,222 | 2,079 | 1,015 | 346 | 34 | % | 7,064 | 1,435 | 5,629 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tax Expense | 294 | 311 | 524 | 486 | 216 | 78 | 36 | % | 1,615 | 294 | 1,321 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income/ (Loss) | $1,067 | $1,091 | $1,698 | $1,593 | $799 | $268 | 34 | % | $5,449 | $1,141 | $4,308 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income/ (Loss) Allocated to Common Stockholders | $1,062 | $1,055 | $1,688 | $1,546 | $794 | $268 | 34 | % | $5,351 | $1,104 | $4,247 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Effective Tax Rate | 21.6 | % | 22.2 | % | 23.6 | % | 23.4 | % | 21.3 | % | 22.9 | % | 20.5 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Margin | 10.81 | % | 10.80 | % | 10.68 | % | 10.75 | % | 10.63 | % | 18 | bps | 10.76 | % | 10.21 | % | 55 | bps | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating Efficiency | 44.7 | % | 42.9 | % | 34.1 | % | 38.7 | % | 45.2 | % | (50) | bps | 39.8 | % | 40.8 | % | (100) | bps | |||||||||||||||||||||||||||||||||||||||||||||||
| ROE | 32 | % | 33 | % | 54 | % | 56 | % | 30 | % | 43 | % | 11 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| ROCE | 35 | % | 35 | % | 59 | % | 59 | % | 33 | % | 46 | % | 12 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital Returned to Common Stockholders | $895 | $940 | $649 | $232 | $119 | $776 | NM | $2,715 | $840 | $1,875 | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payout Ratio | 84 | % | 89 | % | 38 | % | 15 | % | 15 | % | 51 | % | 76 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending Common Shares Outstanding | 288 | 295 | 301 | 306 | 307 | (19) | (6 | %) | 288 | 307 | (19) | (6 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted Average Common Shares Outstanding | 291 | 298 | 304 | 307 | 307 | (16) | (5 | %) | 300 | 307 | (7) | (2 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Weighted Average Common Shares Outstanding (fully diluted) | 292 | 298 | 304 | 307 | 307 | (15) | (5 | %) | 300 | 307 | (7) | (2 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| PER SHARE STATISTICS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basic EPS | $3.64 | $3.54 | $5.56 | $5.04 | $2.59 | $1.05 | 41 | % | $17.85 | $3.60 | $14.25 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Diluted EPS | $3.64 | $3.54 | $5.55 | $5.04 | $2.59 | $1.05 | 41 | % | $17.83 | $3.60 | $14.23 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Dividends Declared Per Share | $0.50 | $0.50 | $0.44 | $0.44 | $0.44 | $0.06 | 14 | % | $1.88 | $1.76 | $0.12 | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock Price (period end) | $115.56 | $122.85 | $118.29 | $94.99 | $90.53 | $25.03 | 28 | % | $115.56 | $90.53 | $25.03 | 28 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Book Value per share | $46.50 | $45.00 | $43.72 | $39.72 | $35.50 | $11.00 | 31 | % | $46.50 | $35.50 | $11.00 | 31 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note: See Glossary of Financial Terms for definitions of financial terms | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DISCOVER FINANCIAL SERVICES | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE SHEET SUMMARY | ||||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in millions) | ||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 vs. Dec 31, 2020 | |||||||||||||||||||||||||||||||||||||||
| BALANCE SHEET SUMMARY | ||||||||||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||||||||
| Cash and Investment Securities | $18,236 | $20,762 | $25,209 | $30,106 | $25,703 | ($7,467) | (29 | %) | ||||||||||||||||||||||||||||||||||||
| Total Loan Receivables | 93,684 | 89,542 | 87,674 | 86,347 | 90,449 | 3,235 | 4 | % | ||||||||||||||||||||||||||||||||||||
| Allowance for Credit Losses | (6,822) | (6,861) | (7,026) | (7,347) | (8,226) | 1,404 | 17 | % | ||||||||||||||||||||||||||||||||||||
| Net Loan Receivables | 86,862 | 82,681 | 80,648 | 79,000 | 82,223 | 4,639 | 6 | % | ||||||||||||||||||||||||||||||||||||
| Premises and Equipment, net | 983 | 987 | 986 | 1,021 | 1,027 | (44) | (4 | %) | ||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets, net | 255 | 256 | 256 | 350 | 350 | (95) | (27 | %) | ||||||||||||||||||||||||||||||||||||
| Other Assets | 3,906 | 3,858 | 3,886 | 3,394 | 3,586 | 320 | 9 | % | ||||||||||||||||||||||||||||||||||||
| Total Assets | $110,242 | $108,544 | $110,985 | $113,871 | $112,889 | ($2,647) | (2 | %) | ||||||||||||||||||||||||||||||||||||
| Liabilities & Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||||||||
Certificates of Deposits 1 | $14,391 | $14,931 | $15,732 | $16,681 | $18,526 | ($4,135) | (22 | %) | ||||||||||||||||||||||||||||||||||||
Savings, Money Market, and Other Deposits 1, 2 | 47,548 | 47,035 | 46,823 | 47,420 | 44,971 | 2,577 | 6 | % | ||||||||||||||||||||||||||||||||||||
Total Direct to Consumer Deposits 1, 2 | 61,939 | 61,966 | 62,555 | 64,101 | 63,497 | (1,558) | (2 | %) | ||||||||||||||||||||||||||||||||||||
| Brokered Deposits and Other Deposits | 10,454 | 10,596 | 11,921 | 12,644 | 13,407 | (2,953) | (22 | %) | ||||||||||||||||||||||||||||||||||||
| Deposits | 72,393 | 72,562 | 74,476 | 76,745 | 76,904 | (4,511) | (6 | %) | ||||||||||||||||||||||||||||||||||||
| Short-term Borrowings | 1,250 | — | — | — | — | 1,250 | NM | |||||||||||||||||||||||||||||||||||||
| Securitized Borrowings | 9,539 | 9,064 | 9,145 | 10,804 | 10,840 | (1,301) | (12 | %) | ||||||||||||||||||||||||||||||||||||
| Other Borrowings | 9,438 | 9,452 | 10,205 | 10,207 | 10,401 | (963) | (9 | %) | ||||||||||||||||||||||||||||||||||||
| Borrowings | 20,227 | 18,516 | 19,350 | 21,011 | 21,241 | (1,014) | (5 | %) | ||||||||||||||||||||||||||||||||||||
| Accrued Expenses and Other Liabilities | 4,214 | 4,203 | 3,988 | 3,961 | 3,860 | 354 | 9 | % | ||||||||||||||||||||||||||||||||||||
| Total Liabilities | 96,834 | 95,281 | 97,814 | 101,717 | 102,005 | (5,171) | (5 | %) | ||||||||||||||||||||||||||||||||||||
| Total Equity | 13,408 | 13,263 | 13,171 | 12,154 | 10,884 | 2,524 | 23 | % | ||||||||||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $110,242 | $108,544 | $110,985 | $113,871 | $112,889 | ($2,647) | (2 | %) | ||||||||||||||||||||||||||||||||||||
| LIQUIDITY | ||||||||||||||||||||||||||||||||||||||||||||
| Liquidity Portfolio | $14,959 | $19,946 | $23,201 | $28,196 | $24,411 | ($9,452) | (39 | %) | ||||||||||||||||||||||||||||||||||||
| Private Asset-backed Securitizations | 3,500 | 4,000 | 4,000 | 6,000 | 6,000 | (2,500) | (42 | %) | ||||||||||||||||||||||||||||||||||||
| Federal Home Loan Bank Borrowing Capacity | 150 | 1,341 | 1,209 | 1,127 | — | 150 | NM | |||||||||||||||||||||||||||||||||||||
Federal Reserve Discount Window 3 | 34,254 | 32,719 | 32,328 | 32,457 | 32,930 | 1,324 | 4 | % | ||||||||||||||||||||||||||||||||||||
Undrawn Credit Facilities 3 | 37,904 | 38,060 | 37,537 | 39,584 | 38,930 | (1,026) | (3 | %) | ||||||||||||||||||||||||||||||||||||
| Total Liquidity | $52,863 | $58,006 | $60,738 | $67,780 | $63,341 | -$10,478 | (17 | %) | ||||||||||||||||||||||||||||||||||||
1 Includes Affinity relationships | ||||||||||||||||||||||||||||||||||||||||||||
2 Savings, Money Market, and Other Deposits includes checking and reflects both interest-bearing and non-interest bearing direct to consumer deposits | ||||||||||||||||||||||||||||||||||||||||||||
3 Excludes investments pledged to the Federal Reserve, which is included within the liquidity portfolio | ||||||||||||||||||||||||||||||||||||||||||||
| Note: See Glossary of Financial Terms for definitions of financial terms | ||||||||||||||||||||||||||||||||||||||||||||
| DISCOVER FINANCIAL SERVICES | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE SHEET STATISTICS | ||||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in millions) | ||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 vs. Dec 31, 2020 | |||||||||||||||||||||||||||||||||||||||
| BALANCE SHEET STATISTICS | ||||||||||||||||||||||||||||||||||||||||||||
| Total Common Equity | $12,352 | $12,207 | $12,115 | $11,098 | $9,828 | $2,524 | 26 | % | ||||||||||||||||||||||||||||||||||||
| Total Common Equity/Total Assets | 11.2 | % | 11.2 | % | 10.9 | % | 9.7 | % | 8.7 | % | ||||||||||||||||||||||||||||||||||
| Total Common Equity/Net Loans | 14.2 | % | 14.8 | % | 15.0 | % | 14.0 | % | 12.0 | % | ||||||||||||||||||||||||||||||||||
| Tangible Assets | $109,987 | $108,288 | $110,729 | $113,521 | $112,539 | ($2,552) | (2 | %) | ||||||||||||||||||||||||||||||||||||
Tangible Common Equity 1 | $12,097 | $11,951 | $11,859 | $10,748 | $9,478 | $2,619 | 28 | % | ||||||||||||||||||||||||||||||||||||
Tangible Common Equity/Tangible Assets 1 | 11.0 | % | 11.0 | % | 10.7 | % | 9.5 | % | 8.4 | % | ||||||||||||||||||||||||||||||||||
Tangible Common Equity/Net Loans 1 | 13.9 | % | 14.5 | % | 14.7 | % | 13.6 | % | 11.5 | % | ||||||||||||||||||||||||||||||||||
Tangible Common Equity per share 1 | $41.96 | $40.55 | $39.37 | $35.12 | $30.91 | $11.05 | 36 | % | ||||||||||||||||||||||||||||||||||||
| Basel III | ||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||
REGULATORY CAPITAL RATIOS 2 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |||||||||||||||||||||||||||||||||||||||
| Total Risk Based Capital Ratio | 17.6 | % | 18.5 | % | 18.8 | % | 18.0 | % | 16.1 | % | ||||||||||||||||||||||||||||||||||
| Tier 1 Risk Based Capital Ratio | 15.8 | % | 16.7 | % | 16.9 | % | 16.1 | % | 14.3 | % | ||||||||||||||||||||||||||||||||||
| Tier 1 Leverage Ratio | 13.9 | % | 13.8 | % | 13.3 | % | 12.2 | % | 10.9 | % | ||||||||||||||||||||||||||||||||||
| Common Equity Tier 1 Capital Ratio | 14.8 | % | 15.5 | % | 15.7 | % | 14.9 | % | 13.1 | % | ||||||||||||||||||||||||||||||||||
| 1 Tangible Common Equity ("TCE") is a non-GAAP measure. The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure see Reconciliation of GAAP to non-GAAP Data schedule | ||||||||||||||||||||||||||||||||||||||||||||
| 2 Based on the final rule published September 30, 2020. Capital ratios reflect delay in the recognition of the impact of CECL reserves on regulatory capital for two years in accordance with the final rule | ||||||||||||||||||||||||||||||||||||||||||||
| Note: See Glossary of Financial Terms for definitions of financial terms | ||||||||||||||||||||||||||||||||||||||||||||
| DISCOVER FINANCIAL SERVICES | |||||||||||||||||||||||||||||||||||||||||
| AVERAGE BALANCE SHEET | |||||||||||||||||||||||||||||||||||||||||
| (unaudited, in millions) | |||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||||||||||||||||||||||
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 vs. Dec 31, 2020 | ||||||||||||||||||||||||||||||||||||
| AVERAGE BALANCES | |||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||
| Cash and Investment Securities | $17,309 | $20,623 | $26,784 | $27,927 | $30,245 | ($12,936) | (43 | %) | |||||||||||||||||||||||||||||||||
| Restricted Cash | 1,164 | 571 | 897 | 136 | 121 | 1,043 | NM | ||||||||||||||||||||||||||||||||||
| Credit Card Loans | 71,865 | 69,416 | 67,420 | 68,723 | 69,997 | 1,868 | 3 | % | |||||||||||||||||||||||||||||||||
| Private Student Loans | 10,094 | 9,932 | 9,993 | 10,211 | 9,952 | 142 | 1 | % | |||||||||||||||||||||||||||||||||
| Personal Loans | 6,923 | 6,900 | 6,884 | 7,075 | 7,197 | (274) | (4 | %) | |||||||||||||||||||||||||||||||||
| Other Loans | 2,213 | 2,108 | 1,999 | 1,896 | 1,814 | 399 | 22 | % | |||||||||||||||||||||||||||||||||
| Total Loans | 91,095 | 88,356 | 86,296 | 87,905 | 88,960 | 2,135 | 2 | % | |||||||||||||||||||||||||||||||||
| Total Interest Earning Assets | 109,568 | 109,550 | 113,977 | 115,968 | 119,326 | (9,758) | (8 | %) | |||||||||||||||||||||||||||||||||
| Allowance for Credit Losses | (6,847) | (7,020) | (7,342) | (8,214) | (8,222) | 1,375 | 17 | % | |||||||||||||||||||||||||||||||||
| Other Assets | 6,379 | 6,430 | 5,971 | 6,165 | 6,050 | 329 | 5 | % | |||||||||||||||||||||||||||||||||
| Total Assets | $109,100 | $108,960 | $112,606 | $113,919 | $117,154 | ($8,054) | (7 | %) | |||||||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||
Certificates of Deposits 1 | $14,606 | $15,373 | $16,109 | $17,682 | $19,032 | ($4,426) | (23 | %) | |||||||||||||||||||||||||||||||||
Savings, Money Market, and Other Deposits 1, 2 | 46,213 | 45,907 | 46,020 | 45,020 | 43,489 | 2,724 | 6 | % | |||||||||||||||||||||||||||||||||
Interest-bearing Direct to Consumer Deposits 1, 2 | 60,819 | 61,280 | 62,129 | 62,702 | 62,521 | (1,702) | (3 | %) | |||||||||||||||||||||||||||||||||
| Brokered Deposits and Other Deposits | 9,834 | 10,691 | 11,915 | 12,621 | 13,711 | (3,877) | (28 | %) | |||||||||||||||||||||||||||||||||
| Total Interest-bearing Deposits | 70,653 | 71,971 | 74,044 | 75,323 | 76,232 | (5,579) | (7 | %) | |||||||||||||||||||||||||||||||||
| Short-term Borrowings | 277 | 6 | — | 1 | 3,722 | (3,445) | NM | ||||||||||||||||||||||||||||||||||
| Securitized Borrowings | 9,119 | 8,292 | 10,305 | 10,826 | 10,945 | (1,826) | (17 | %) | |||||||||||||||||||||||||||||||||
| Other Long-term Borrowings | 9,444 | 9,550 | 10,211 | 10,360 | 10,409 | (965) | (9 | %) | |||||||||||||||||||||||||||||||||
| Total Interest-bearing Liabilities | 89,493 | 89,819 | 94,560 | 96,510 | 101,308 | (11,815) | (12 | %) | |||||||||||||||||||||||||||||||||
| Other Liabilities & Stockholders' Equity | 19,607 | 19,141 | 18,046 | 17,409 | 15,846 | 3,761 | 24 | % | |||||||||||||||||||||||||||||||||
| Total Liabilities and Stockholders' Equity | $109,100 | $108,960 | $112,606 | $113,919 | $117,154 | ($8,054) | (7 | %) | |||||||||||||||||||||||||||||||||
| AVERAGE YIELD | |||||||||||||||||||||||||||||||||||||||||
| Assets | |||||||||||||||||||||||||||||||||||||||||
| Cash and Investment Securities | 1.01 | % | 0.95 | % | 0.78 | % | 0.79 | % | 1.14 | % | (13) | bps | |||||||||||||||||||||||||||||
| Restricted Cash | 0.03 | % | 0.03 | % | 0.02 | % | 0.03 | % | 0.05 | % | (2) | bps | |||||||||||||||||||||||||||||
| Credit Card Loans | 12.50 | % | 12.53 | % | 12.52 | % | 12.71 | % | 12.65 | % | (15) | bps | |||||||||||||||||||||||||||||
| Private Student Loans | 7.37 | % | 7.36 | % | 7.41 | % | 7.37 | % | 7.40 | % | (3) | bps | |||||||||||||||||||||||||||||
| Personal Loans | 12.36 | % | 12.61 | % | 12.76 | % | 12.83 | % | 13.01 | % | (65) | bps | |||||||||||||||||||||||||||||
| Other Loans | 5.39 | % | 5.41 | % | 5.59 | % | 5.94 | % | 6.02 | % | (63) | bps | |||||||||||||||||||||||||||||
| Total Loans | 11.75 | % | 11.79 | % | 11.79 | % | 11.96 | % | 11.96 | % | (21) | bps | |||||||||||||||||||||||||||||
| Total Interest Earning Assets | 9.93 | % | 9.68 | % | 9.11 | % | 9.25 | % | 9.20 | % | 73 | bps | |||||||||||||||||||||||||||||
| AVERAGE RATES | |||||||||||||||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||
Certificates of Deposits 1 | 1.07 | % | 1.19 | % | 1.32 | % | 1.57 | % | 1.80 | % | (73) | bps | |||||||||||||||||||||||||||||
Savings, Money Market, and Other Deposits 1, 2 | 0.42 | % | 0.42 | % | 0.42 | % | 0.45 | % | 0.57 | % | (15) | bps | |||||||||||||||||||||||||||||
Interest-bearing Direct to Consumer Deposits 1, 2 | 0.58 | % | 0.61 | % | 0.65 | % | 0.77 | % | 0.94 | % | (36) | bps | |||||||||||||||||||||||||||||
| Brokered Deposits and Other Deposits | 2.16 | % | 2.28 | % | 2.35 | % | 2.37 | % | 2.38 | % | (22) | bps | |||||||||||||||||||||||||||||
| Total Interest-bearing Deposits | 0.80 | % | 0.86 | % | 0.92 | % | 1.04 | % | 1.20 | % | (40) | bps | |||||||||||||||||||||||||||||
| Short-term Borrowings | 0.18 | % | 0.24 | % | 0.11 | % | 0.15 | % | 3.10 | % | (292) | bps | |||||||||||||||||||||||||||||
| Securitized Borrowings | 1.09 | % | 1.10 | % | 1.01 | % | 1.07 | % | 1.06 | % | 3 | bps | |||||||||||||||||||||||||||||
| Other Long-term Borrowings | 3.86 | % | 3.78 | % | 3.66 | % | 3.72 | % | 3.60 | % | 26 | bps | |||||||||||||||||||||||||||||
| Total Interest-bearing Liabilities | 1.15 | % | 1.19 | % | 1.23 | % | 1.33 | % | 1.50 | % | (35) | bps | |||||||||||||||||||||||||||||
| Net Interest Margin | 10.81 | % | 10.80 | % | 10.68 | % | 10.75 | % | 10.63 | % | 18 | bps | |||||||||||||||||||||||||||||
| Net Yield on Interest-earning Assets | 8.99 | % | 8.71 | % | 8.09 | % | 8.15 | % | 7.93 | % | 106 | bps | |||||||||||||||||||||||||||||
1 Includes Affinity relationships | |||||||||||||||||||||||||||||||||||||||||
2 Excludes checking which is a non-interest bearing deposit product. All non-interest bearing deposits, including checking, are reflected in Other Liabilities & Stockholders’ Equity on the average balance sheet | |||||||||||||||||||||||||||||||||||||||||
| Note: See Glossary of Financial Terms for definitions of financial terms | |||||||||||||||||||||||||||||||||||||||||
| DISCOVER FINANCIAL SERVICES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOAN STATISTICS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 vs. Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | 2021 vs. 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TOTAL LOAN RECEIVABLES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ending Loans 1 | $93,684 | $89,542 | $87,674 | $86,347 | $90,449 | $3,235 | 4 | % | $93,684 | $90,449 | $3,235 | 4 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average Loans 1 | $91,095 | $88,356 | $86,296 | $87,905 | $88,960 | $2,135 | 2 | % | $88,421 | $90,403 | ($1,982) | (2 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Yield | 11.75 | % | 11.79 | % | 11.79 | % | 11.96 | % | 11.96 | % | (21) | bps | 11.82 | % | 11.95 | % | (13) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Principal Charge-off Rate | 2.36 | % | 2.50 | % | 3.20 | % | 3.45 | % | 3.17 | % | (81) | bps | 2.87 | % | 3.85 | % | (98) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Principal Charge-off Rate | 1.37 | % | 1.46 | % | 2.12 | % | 2.48 | % | 2.38 | % | (101) | bps | 1.84 | % | 3.03 | % | (119) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Delinquency Rate (30 or more days) | 1.55 | % | 1.40 | % | 1.34 | % | 1.67 | % | 1.89 | % | (34) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Delinquency Rate (90 or more days) | 0.66 | % | 0.58 | % | 0.63 | % | 0.85 | % | 0.88 | % | (22) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Principal Charge-off Dollars | $543 | $556 | $688 | $747 | $709 | ($166) | (23 | %) | $2,534 | $3,476 | ($942) | (27 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Principal Charge-off Dollars | $313 | $325 | $456 | $537 | $531 | ($218) | (41 | %) | $1,631 | $2,735 | ($1,104) | (40 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Interest and Fee Charge-off Dollars | $70 | $72 | $101 | $118 | $113 | ($43) | (38 | %) | $361 | $601 | ($240) | (40 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Delinquent 30 or more days | $1,451 | $1,258 | $1,172 | $1,438 | $1,705 | ($254) | (15 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Delinquent 90 or more days | $618 | $522 | $550 | $732 | $795 | ($177) | (22 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for Credit Losses (period end) | $6,822 | $6,861 | $7,026 | $7,347 | $8,226 | ($1,404) | (17 | %) | $6,822 | $8,226 | ($1,404) | (17 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve Change Build/ (Release) 2, 3 | ($39) | ($165) | ($321) | ($879) | $— | ($39) | ($1,404) | $2,382 | ($3,786) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reserve Rate | 7.28 | % | 7.66 | % | 8.01 | % | 8.51 | % | 9.09 | % | (181) | bps | 7.28 | % | 9.09 | % | (181) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CREDIT CARD LOANS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending Loans | $74,369 | $70,320 | $68,886 | $67,304 | $71,472 | $2,897 | 4 | % | $74,369 | $71,472 | $2,897 | 4 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Loans | $71,865 | $69,416 | $67,420 | $68,723 | $69,997 | $1,868 | 3 | % | $69,365 | $71,447 | ($2,082) | (3 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Yield | 12.50 | % | 12.53 | % | 12.52 | % | 12.71 | % | 12.65 | % | (15) | bps | 12.57 | % | 12.58 | % | (1) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Principal Charge-off Rate | 2.63 | % | 2.83 | % | 3.69 | % | 3.91 | % | 3.53 | % | (90) | bps | 3.25 | % | 4.34 | % | (109) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Principal Charge-off Rate | 1.50 | % | 1.65 | % | 2.45 | % | 2.80 | % | 2.63 | % | (113) | bps | 2.09 | % | 3.41 | % | (132) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Delinquency Rate (30 or more days) | 1.66 | % | 1.48 | % | 1.43 | % | 1.85 | % | 2.07 | % | (41) | bps | 1.66 | % | 2.07 | % | (41) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Delinquency Rate (90 or more days) | 0.76 | % | 0.66 | % | 0.73 | % | 1.01 | % | 1.03 | % | (27) | bps | 0.76 | % | 1.03 | % | (27) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Principal Charge-off Dollars | $477 | $495 | $620 | $663 | $621 | ($144) | (23 | %) | $2,255 | $3,101 | ($846) | (27 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Principal Charge-off Dollars | $272 | $289 | $412 | $474 | $463 | ($191) | (41 | %) | $1,447 | $2,438 | ($991) | (41 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Delinquent 30 or more days | $1,232 | $1,040 | $983 | $1,245 | $1,478 | ($246) | (17 | %) | $1,232 | $1,478 | ($246) | (17 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loans Delinquent 90 or more days | $562 | $467 | $504 | $680 | $739 | ($177) | (24 | %) | $562 | $739 | ($177) | (24 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for Credit Losses (period end) | $5,273 | $5,298 | $5,409 | $5,640 | $6,491 | ($1,218) | (19 | %) | $5,273 | $6,491 | ($1,218) | (19 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve Change Build/ (Release) 2 | ($25) | ($111) | ($231) | ($851) | $— | ($25) | ($1,218) | $1,941 | ($3,159) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reserve Rate | 7.09 | % | 7.54 | % | 7.85 | % | 8.38 | % | 9.08 | % | (199) | bps | 7.09 | % | 9.08 | % | (199) | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Discover Card Volume | $53,983 | $50,389 | $48,049 | $40,334 | $43,581 | $10,402 | 24 | % | $192,755 | $153,943 | $38,812 | 25 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discover Card Sales Volume | $51,308 | $47,613 | $45,460 | $37,744 | $40,957 | $10,351 | 25 | % | $182,125 | $142,800 | $39,325 | 28 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Rewards Rate | 1.35 | % | 1.44 | % | 1.31 | % | 1.38 | % | 1.38 | % | (3) | bps | 1.37 | % | 1.35 | % | 2 | bps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 Total Loans includes Home Equity and other loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 Excludes January 1, 2020 CECL day one impact | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3 Excludes any build/release of the liability for expected credit losses on unfunded commitments as the offset is recorded in accrued expenses and other liabilities in the Company's condensed consolidated statements of financial condition | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note: See Glossary of Financial Terms for definitions of financial terms | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DISCOVER FINANCIAL SERVICES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOAN STATISTICS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 vs. Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | 2021 vs. 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PRIVATE STUDENT LOANS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organic Student Loans | $9,367 | $9,391 | $9,021 | $9,254 | $8,989 | $378 | 4 | % | $9,367 | $8,989 | $378 | 4 | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Purchased Student Loans | 746 | 793 | 843 | 899 | 965 | (219) | (23 | %) | 746 | 965 | (219) | (23 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total Private Student Loans | $10,113 | $10,184 | $9,864 | $10,153 | $9,954 | $159 | 2 | % | $10,113 | $9,954 | $159 | 2 | % | |||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Yield | 7.37 | % | 7.36 | % | 7.41 | % | 7.37 | % | 7.40 | % | (3) | bps | 7.38 | % | 7.63 | % | (25) | bps | ||||||||||||||||||||||||||||||||||||||||||||
Net Principal Charge-off Rate 1 | 0.80 | % | 0.68 | % | 0.53 | % | 0.53 | % | 0.71 | % | 9 | bps | 0.63 | % | 0.65 | % | (2) | bps | ||||||||||||||||||||||||||||||||||||||||||||
| Delinquency Rate (30 or more days) | 1.55 | % | 1.55 | % | 1.34 | % | 1.20 | % | 1.39 | % | 16 | bps | 1.55 | % | 1.39 | % | 16 | bps | ||||||||||||||||||||||||||||||||||||||||||||
| Reserve Rate | 8.33 | % | 8.41 | % | 8.39 | % | 8.49 | % | 8.43 | % | (10) | bps | 8.33 | % | 8.43 | % | (10) | bps | ||||||||||||||||||||||||||||||||||||||||||||
| PERSONAL LOANS | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ending Loans | $6,936 | $6,890 | $6,865 | $6,961 | $7,177 | ($241) | (3 | %) | $6,936 | $7,177 | ($241) | (3 | %) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Yield | 12.36 | % | 12.61 | % | 12.76 | % | 12.83 | % | 13.01 | % | (65) | bps | 12.64 | % | 12.93 | % | (29) | bps | ||||||||||||||||||||||||||||||||||||||||||||
| Net Principal Charge-off Rate | 1.21 | % | 1.11 | % | 1.80 | % | 2.80 | % | 2.79 | % | (158) | bps | 1.73 | % | 3.13 | % | (140) | bps | ||||||||||||||||||||||||||||||||||||||||||||
| Delinquency Rate (30 or more days) | 0.69 | % | 0.71 | % | 0.69 | % | 0.84 | % | 1.08 | % | (39) | bps | 0.69 | % | 1.08 | % | (39) | bps | ||||||||||||||||||||||||||||||||||||||||||||
| Reserve Rate | 9.54 | % | 9.61 | % | 10.85 | % | 11.55 | % | 11.94 | % | (240) | bps | 9.54 | % | 11.94 | % | (240) | bps | ||||||||||||||||||||||||||||||||||||||||||||
| Note: See Glossary of Financial Terms for definitions of financial terms | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DISCOVER FINANCIAL SERVICES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT RESULTS AND VOLUME STATISTICS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (unaudited, in millions) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Quarter Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Dec 31, 2021 vs. Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2020 | 2021 vs. 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DIGITAL BANKING | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Income | $2,742 | $2,674 | $2,589 | $2,646 | $2,760 | ($18) | (1 | %) | $10,651 | $11,095 | ($444) | (4 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Expense | 259 | 269 | 290 | 316 | 383 | (124) | (32 | %) | 1,134 | 1,865 | (731) | (39 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Income | 2,483 | 2,405 | 2,299 | 2,330 | 2,377 | 106 | 4 | % | 9,517 | 9,230 | 287 | 3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-Interest Income | 497 | 447 | 458 | 379 | 368 | 129 | 35 | % | 1,781 | 1,459 | 322 | 22 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue Net of Interest Expense | 2,980 | 2,852 | 2,757 | 2,709 | 2,745 | 235 | 9 | % | 11,298 | 10,689 | 609 | 6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for Credit Losses | 263 | 185 | 135 | (365) | 531 | (268) | (50 | %) | 218 | 5,134 | (4,916) | (96 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Operating Expense | 1,259 | 1,151 | 1,092 | 1,047 | 1,223 | 36 | 3 | % | 4,549 | 4,292 | 257 | 6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income/ (Loss) Before Income Taxes | $1,458 | $1,516 | $1,530 | $2,027 | $991 | $467 | 47 | % | $6,531 | $1,263 | $5,268 | NM | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Margin | 10.81 | % | 10.80 | % | 10.68 | % | 10.75 | % | 10.63 | % | 18 | bps | 10.76 | % | 10.21 | % | 55 | bps | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pretax Return on Loan Receivables | 6.35 | % | 6.81 | % | 7.11 | % | 9.36 | % | 4.44 | % | 191 | bps | 7.39 | % | 1.4 | % | 599 | bps | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Allowance for Credit Losses (period end) | $6,822 | $6,861 | $7,026 | $7,347 | $8,226 | ($1,404) | (17 | %) | $6,822 | $8,226 | ($1,404) | (17 | %) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reserve Change Build/ (Release) 1 | ($39) | ($165) | ($321) | ($879) | $— | ($39) | ($1,404) | $2,382 | ($3,786) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PAYMENT SERVICES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Income | $— | $— | $— | $— | $— | $— | NM | $— | $— | $— | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest Expense | — | — | — | — | — | — | NM | — | — | — | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Income | — | — | — | — | — | — | NM | — | — | — | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-Interest Income/ (Loss) | (44) | (75) | 822 | 86 | 79 | (123) | (156 | %) | 789 | 399 | 390 | 98 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue Net of Interest Expense | (44) | (75) | 822 | 86 | 79 | (123) | (156 | %) | 789 | 399 | 390 | 98 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Provision for Credit Losses | — | — | — | — | — | — | NM | — | — | — | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Operating Expense | 53 | 39 | 130 | 34 | 55 | (2) | (4 | %) | 256 | 227 | 29 | 13 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income/ (Loss) Before Income Taxes | ($97) | ($114) | $692 | $52 | $24 | ($121) | NM | $533 | $172 | $361 | NM | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TRANSACTIONS PROCESSED ON NETWORKS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discover Network | 914 | 868 | 799 | 678 | 735 | 179 | 24 | % | 3,259 | 2,624 | 635 | 24 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PULSE Network | 1,508 | 1,415 | 1,399 | 1,310 | 1,286 | 222 | 17 | % | 5,632 | 4,954 | 678 | 14 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | 2,422 | 2,283 | 2,198 | 1,988 | 2,021 | 401 | 20 | % | 8,891 | 7,578 | 1,313 | 17 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NETWORK VOLUME | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PULSE Network | $64,787 | $59,872 | $62,855 | $60,399 | $55,055 | $9,732 | 18 | % | $247,913 | $212,081 | $35,832 | 17 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Network Partners | 11,233 | 10,377 | 9,468 | 9,629 | 8,740 | 2,493 | 29 | % | 40,707 | 31,917 | 8,790 | 28 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Diners Club International 2 | 7,367 | 6,547 | 6,126 | 5,897 | 6,321 | 1,046 | 17 | % | 25,937 | 24,236 | 1,701 | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Payment Services | 83,387 | 76,796 | 78,449 | 75,925 | 70,116 | 13,271 | 19 | % | 314,557 | 268,234 | 46,323 | 17 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discover Network - Proprietary | 53,197 | 49,360 | 47,201 | 39,202 | 42,526 | 10,671 | 25 | % | 188,960 | 148,754 | 40,206 | 27 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $136,584 | $126,156 | $125,650 | $115,127 | $112,642 | $23,942 | 21 | % | $503,517 | $416,988 | $86,529 | 21 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1 Excludes January 1, 2020 CECL day one impact | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2 Volume is derived from data provided by licencees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Note: See Glossary of Financial Terms for definitions of financial terms | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DISCOVER FINANCIAL SERVICES - GLOSSARY OF FINANCIAL TERMS | |||||||||||
| Balance Sheet & Regulatory Capital Terms | |||||||||||
Liquidity Portfolio represents cash and cash equivalents (excluding cash-in-process) and other investments | |||||||||||
Regulatory Capital Ratios are preliminary | |||||||||||
| • | Total Risk Based Capital Ratio represents total capital divided by risk-weighted assets | ||||||||||
| • | Tier 1 Capital Ratio represents tier 1 capital divided by risk-weighted assets | ||||||||||
| • | Tier 1 Leverage Ratio represents tier 1 capital divided by average total assets | ||||||||||
| • | Common Equity Tier 1 Capital Ratio represents common equity tier 1 capital divided by risk weighted assets | ||||||||||
Tangible Assets represents total assets less goodwill and intangibles | |||||||||||
Tangible Common Equity ("TCE"), a non-GAAP financial measure, represents total common equity less goodwill and intangibles. The Company believes TCE is a meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of GAAP to Non-GAAP Data | |||||||||||
Tangible Common Equity/Net Loans, a non-GAAP measure, represents TCE divided by total loans less the allowance for credit losses (period end) | |||||||||||
Tangible Common Equity per Share, a non-GAAP measure, represents TCE divided by ending common shares outstanding | |||||||||||
Tangible Common Equity/Tangible Assets, a non-GAAP measure, represents TCE divided by total assets less goodwill and intangibles | |||||||||||
Undrawn Credit Facilities represents asset-backed conduit funding facilities and Federal Reserve discount window (excluding investments pledged to the Federal Reserve, which are included within the liquidity investment portfolio) | |||||||||||
| Credit Related Terms | |||||||||||
Delinquency Rate (30 or more days) represents loans delinquent thirty days or more divided by ending loans (total or respective product loans, as appropriate) | |||||||||||
Delinquency Rate (90 or more days) represents loans delinquent ninety days or more divided by ending loans (total or respective product loans, as appropriate) | |||||||||||
Gross Principal Charge-off Rate represents gross principal charge-off dollars (annualized) divided by average loans for the reporting period (total or respective product loans, as appropriate) | |||||||||||
Net Principal Charge-off Rate represents net principal charge-off dollars (annualized) divided by average loans for the reporting period (total or respective product loans, as appropriate) | |||||||||||
Reserve Rate represents the allowance for credit losses divided by total loans (total or respective product loans, as appropriate) | |||||||||||
| Earnings and Shareholder Return Terms | |||||||||||
Book Value per share represents total equity divided by ending common shares outstanding | |||||||||||
Capital Returned to Common Stockholders represents common stock dividends declared and treasury share repurchases, excluding common stock issued under employee benefit plans and stock based compensation | |||||||||||
Earnings Per Share represents net income allocated to common stockholders divided by the weighted average common shares outstanding | |||||||||||
Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period (total or respective product loans, as appropriate) | |||||||||||
Net Income Allocated to Common Stockholders represents net income less preferred stock dividends and income allocated to participating securities | |||||||||||
Net Interest Margin represents net interest income (annualized) divided by average total loans for the period | |||||||||||
Net Yield on Interest Earning Assets represents net interest income (annualized) divided by average total interest earning assets for the period | |||||||||||
Operating Efficiency represents total operating expense divided by revenue net of interest expense | |||||||||||
Pretax Return on Loan Receivables represents income before income taxes (annualized) divided by total average loans for the period | |||||||||||
Payout Ratio represents capital returned to common stockholders divided by net income allocated to common stockholders | |||||||||||
Return on Equity represents net income (annualized) divided by average total equity for the reporting period | |||||||||||
Rewards Rate represents Credit Card rewards cost divided by Discover Card sales volume | |||||||||||
| Volume Terms | |||||||||||
Discover Card Sales Volume represents Discover card activity related to sales net of returns | |||||||||||
Discover Card Volume represents Discover card activity related to sales net of returns, balance transfers, cash advances and other activity | |||||||||||
Discover Network Proprietary Volume represents gross Discover Card sales volume on the Discover Network | |||||||||||
| DISCOVER FINANCIAL SERVICES | |||||||||||||||||||||||||||||
| RECONCILIATION OF GAAP TO NON-GAAP DATA | |||||||||||||||||||||||||||||
| (unaudited, in millions) | |||||||||||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||||||||||
| Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | |||||||||||||||||||||||||
| GAAP Total Common Equity | $12,352 | $12,207 | $12,115 | $11,098 | $9,828 | ||||||||||||||||||||||||
| Less: Goodwill | (255) | (255) | (255) | (255) | (255) | ||||||||||||||||||||||||
| Less: Intangibles | — | (1) | (1) | (95) | (95) | ||||||||||||||||||||||||
Tangible Common Equity 1 | $12,097 | $11,951 | $11,859 | $10,748 | $9,478 | ||||||||||||||||||||||||
| GAAP Book Value Per Share | $46.50 | $45.00 | $43.72 | $39.72 | $35.50 | ||||||||||||||||||||||||
| Less: Goodwill | (0.88) | (0.87) | (0.84) | (0.84) | (0.84) | ||||||||||||||||||||||||
| Less: Intangibles | 0.00 | 0.00 | 0.00 | (0.31) | (0.31) | ||||||||||||||||||||||||
| Less: Preferred Stock | (3.66) | (3.58) | (3.51) | (3.45) | (3.44) | ||||||||||||||||||||||||
| Tangible Common Equity Per Share | $41.96 | $40.55 | $39.37 | $35.12 | $30.91 | ||||||||||||||||||||||||
1 Tangible Common Equity ("TCE"), a non-GAAP financial measure, represents common equity less goodwill and intangibles. A reconciliation of TCE to common equity, a GAAP financial measure, is shown above. Other financial services companies may also use TCE and definitions may vary, so users of this information are advised to exercise caution in comparing TCE of different companies. TCE is included because management believes that common equity excluding goodwill and intangibles is a more meaningful measure to investors of the true net asset value of the Company | |||||||||||||||||||||||||||||
| Note: See Glossary of Financial Terms for definitions of financial terms | |||||||||||||||||||||||||||||
©2022 DISCOVER FINANCIAL SERVICES Exhibit 99.3 2021 & 4Q21 Financial Results January 19, 2022
The following slides are part of a presentation by Discover Financial Services (the "Company") in connection with reporting quarterly financial results and are intended to be viewed as part of that presentation. No representation is made that the information in these slides is complete. For additional financial, statistical, and business related information, as well as information regarding business and segment trends, see the earnings release and financial supplement included as exhibits to the Company’s Current Report on Form 8-K filed today and available on the Company’s website (www.discover.com) and the SEC’s website (www.sec.gov). The presentation contains forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management’s estimates, projections, expectations or beliefs at that time, and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of certain risks and uncertainties that may affect the future results of the Company, please see "Special Note Regarding Forward-Looking Statements," "Risk Factors," "Business – Competition," "Business – Supervision and Regulation" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, "Risk Factors" and “Management's Discussion & Analysis of Financial Condition and Results of Operations” in the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, June 30, 2021 and March 31, 2021, which is filed with the SEC and available at the SEC's website (www.sec.gov) and subsequent reports on Forms 8-K and 10-Q, including the Company's Current Report on Form 8-K filed today with the SEC. The Company does not undertake to update or revise forward-looking statements as more information becomes available. Notice 2
Full Year 2021 Highlights 3 • 2021 net income of $5.4Bn; diluted EPS of $17.83; and return on equity of 43% ◦ 4Q21 net income of $1.1Bn; diluted EPS of $3.64; and return on equity of 32% • Quickly pivoted to account acquisition and brand investment as economy began to recover ◦ New accounts up 13% over 2019 and up 23% YOY ◦ Accounts acquired in 2021 will contribute to more robust loan growth in 2022 ◦ We will continue to invest in growth as we see profitable opportunities • Returned to YOY loan growth, up 4%, supported by strong sales volume ◦ Card sales up 25% over 2019 and 28% YOY with growth across all categories ◦ Continued high engagement in rotating 5% categories contributed to growth as cashback rewards continued to resonate strongly with consumers • Strong credit and an improving economic outlook supported $1.4Bn reserve release • Effective deployment of capital through investment in profitable growth and significant capital return to shareholders; repurchased $2.3Bn of common stock in 2021 and increased quarterly dividend by 14%
4 Card Ending Loans & Payment Rate $71 $72 $74 $77 $74 $70 $70 $71 $67 $69 $70 $74 Card Ending Loans ($Bn) Card Payment Rate (%) 1Q192Q19 3Q194Q191Q202Q203Q204Q20 1Q212Q213Q214Q21 Card Credit Performance 3.50 3.49 3.32 3.41 3.65 3.90 3.45 2.63 2.80 2.45 1.65 1.502.45 2.34 2.50 2.62 2.62 2.17 1.91 2.07 1.85 1.43 1.48 1.66 NCO rate (%) 30+ day DQ rate (%) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 New Account Growth 11% (24)% (10)% (8)% 4% 66% 22% 11% New Account Growth YOY (%) 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Sales Growth 3% (16)% (1)% 5% 11% 48% 28% 25% Sales Growth YOY (%) 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 2021 Key Trends
• Revenue net of interest expense was $2.9Bn, up 4%, driven by increased net interest income, higher net discount and interchange revenue and higher loan fee income, partially offset by a $139MM unrealized loss on equity investments • Net interest margin was 10.81%, up 18 bps driven by favorable funding costs partially offset by lower loan yields • Provision for credit losses decreased by $268MM driven by the impact of lower net charge-offs and a reserve release in the current quarter • Expenses were up $34MM, or 3%. The prior year included $137 million of one-time expense items; excluding these, the increase primarily reflects higher marketing expense and increased professional fees 4Q21 Summary Financial Results Key Points 5 $799 $106 $6 $268 $(34) $(78) $1,067 4Q20 Net Income Net Interest Income Non- Interest Income Provision for Credit Losses Operating Expense Income Tax/ Capital Action 4Q21 Net Income Year-Over-Year Net Income & EPS ($MM, except EPS) 4Q21 $ 2,483 $ 453 $ 263 $ 1,312 $ 294 4Q20 $ 2,377 $ 447 $ 531 $ 1,278 $ 216 B/(W) $ 106 $ 6 $ 268 $ (34) $ (78) EPS 2.59 $ 0.27 $ 0.02 $ 0.69 $ (0.09) $ 0.16 $ 3.64
4% 4% 4% (3)% YOY YOY YOY YOY 4Q21 Loan Growth ($Bn) Total 6 • Card receivables up 4% YOY and up 6% QOQ driven by increased sales volume and new account acquisition, partially offset by an elevated payment rate • Organic student loans up 4% YOY • Personal loans down 3% YOY due to increased payments, but stable sequentially as underwriting returned to pre- pandemic standards earlier this year Key Points $90.4 $86.3 $87.7 $89.5 $93.7 4Q20 1Q21 2Q21 3Q21 4Q21 $71.5 $67.3 $68.9 $70.3 $74.4 4Q20 1Q21 2Q21 3Q21 4Q21 $9.0 $9.3 $9.0 $9.4 $9.4 4Q20 1Q21 2Q21 3Q21 4Q21 $7.2 $7.0 $6.9 $6.9 $6.9 4Q20 1Q21 2Q21 3Q21 4Q21 Organic Student Card Personal
• NIM on loans was 10.81%, up 1bp QOQ reflecting slightly favorable funding costs mostly offset by modestly lower loan yields • Total loan yield was down 4bps QOQ primarily driven by an increase in promotional rate balances in card • Consumer deposits were down 3% YOY and down 1% QOQ • The rate on average interest-bearing liabilities decreased 4bps QOQ, driven by maturity of higher coupon CDs and a continued shift in funding mix 4Q21 Net Interest Margin Change (%) 4Q21 3Q21 4Q20 QOQ YOY Total Interest Yield on Loans 11.75 % 11.79 % 11.96 % -4bps -21bps NIM on Loans 10.81 % 10.80 % 10.63 % 1bps 18bps NIM on Interest-Earning Assets 8.99 % 8.71 % 7.93 % 28bps 106bps 4Q21 3Q21 4Q20 Interest-Earning Assets ($Bn) Avg Bal Yield Avg Bal Yield Avg Bal Yield Total Loans $91.1 11.75 % $88.4 11.79 % $89.0 11.96 % Other Interest-Earning Assets 18.5 0.95 % 21.2 0.92 % 30.3 1.13 % Total Interest-Earning Assets $109.6 9.93 % $109.6 9.68 % $119.3 9.20 % 4Q21 3Q21 4Q20 Interest-Bearing Liabilities ($Bn) Avg Bal Rate Avg Bal Rate Avg Bal Rate Direct to Consumer Deposits (1) (2) $60.8 0.58 % $61.3 0.61 % $62.5 0.94 % Brokered Deposits and Other 9.8 2.16 % 10.7 2.28 % 13.7 2.38 % Interest Bearing-Deposits 70.7 0.80 % 72.0 0.86 % 76.2 1.20 % Borrowings 18.8 2.46 % 17.8 2.53 % 25.1 2.42 % Total Interest-Bearing Liabilities $89.5 1.15 % $89.8 1.19 % $101.3 1.50 % 7 Key Points Note(s) 1. Includes Affinity relationships 2. Excludes checking which is a non-interest bearing deposit product NIM on Loans 10.29% 10.21% 9.81% 10.19% 10.63% 10.75% 10.68% 10.80% 10.81% 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21
Note(s) 1. Rewards rate represents credit card rewards cost divided by Discover Card sales volume • Net interest income increased 4% primarily due to higher average receivables, favorable funding costs and lower interest charge-offs, partially offset by a lower credit card revolve rate • Net discount and interchange revenue was up 43% driven by higher sales volume, partially offset by increased rewards cost; rewards rate was down 3bps YOY • Loan fee income increased 19% largely reflecting higher non- sufficient fund fees, lower late fee charge-offs, and higher cash advance fees • The unrealized loss reflects mark-to- market adjustments on equity investments 4Q21 Revenue 8 Key Points Inc / (Dec) ($MM) 4Q21 4Q20 $ % Net Interest Income 2,483 2,377 106 4% Net Discount/Interchange Revenue 345 242 103 43% Protection Products Revenue 36 45 (9) (20%) Loan Fee Income 131 110 21 19% Transaction Processing Revenue 60 52 8 15% Realized/Unrealized Gain/(Loss) on Equity Investment (138) 0 (138) NM Other Income 19 (2) 21 NM Total Non-Interest Income 453 447 6 1% Revenue Net of Interest Expense $2,936 $2,824 $112 4% Change 4Q21 4Q20 QOQ YOY Discover Card Sales Volume ($MM) $51,308 $40,957 8 % 25 % Rewards Rate (1) 1.35 % 1.38 % -9bps -3bps $2,824 $106 $103 $(9) $21 $8 $(138) $21 $2,936 4Q20 Rev Net of Int Exp Net Interest Income Net Discount/ Interchange Protection Products Loan Fee Income Transaction Processing Gain/(Loss) on Equity Investments Other Income 4Q21 Rev Net of Int Exp Year-Over-Year Revenue ($MM)
Note(s) 1. Defined as reported total operating expense divided by revenue net of interest expense • Employee compensation reflects the impact of unusual items in 4Q20 and increased bonus expense in 4Q21 • Marketing increased primarily due to investments in acquisition and brand • Information processing decreased driven by $77MM of software write-offs in 4Q20 • Professional fees increased driven by consulting costs and higher recovery fees • Other expense decreased driven by a $27MM charge in the prior year related to penalties and restitution 4Q21 Operating Expense Inc / (Dec) ($MM) 4Q21 4Q20 $ % Employee Compensation and Benefits $499 $504 (5) (1%) Marketing and Business Development 271 159 112 70% Information Processing & Communications 125 198 (73) (37%) Professional Fees 230 192 38 20% Premises and Equipment 23 30 (7) (23%) Other Expense 164 195 (31) (16%) Total Operating Expense $1,312 $1,278 $34 3% Operating Efficiency(1) 44.7 % 45.2 % (50) bps 9 Key PointsYear-Over-Year Expense ($MM) $1,278 $(5) $112 $(73) $38 $(38) $1,312 4Q20 Expense Employee Comp Marketing Info Processing Professional Fees All Other 4Q21 Expense
• Credit card net charge-off rate decreased 113bps YOY and 30-Day delinquency decreased 41bps YOY reflecting strong credit performance in the portfolio • Student loan credit performance remained stable at low levels • Personal loan net charge-offs improved 158bps YOY reflecting underwriting enhancements and elevated consumer liquidity 4Q21 Key Credit Metrics 10 Key PointsChange 4Q20 3Q21 4Q21 QOQ YOY Credit Card Loans Ending Loan Balance ($MM) $71,472 $70,320 $74,369 5.8% 4.1% Net Principal Charge-off Rate 2.63% 1.65% 1.50% (15) bps (113) bps 30-Day Delinquency Rate 2.07% 1.48% 1.66% 18 bps (41) bps Private Student Loans Ending Loan Balance ($MM) $9,954 $10,184 $10,113 (0.7)% 1.6% Net Principal Charge-off Rate 0.71% 0.68% 0.80% 12 bps 9 bps 30-Day Delinquency Rate 1.39% 1.55% 1.55% 0 bps 16 bps Personal Loans Ending Loan Balance ($MM) $7,177 $6,890 $6,936 0.7% (3.4)% Net Principal Charge-off Rate 2.79% 1.11% 1.21% 10 bps (158) bps 30-Day Delinquency Rate 1.08% 0.71% 0.69% (2) bps (39) bps Total Loans Ending Loan Balance ($MM) $90,449 $89,542 $93,684 4.6% 3.6% Net Principal Charge-off Rate 2.38% 1.46% 1.37% (9) bps (101) bps 30-Day Delinquency Rate 1.89% 1.40% 1.55% 15 bps (34) bps
Allowance for Credit Losses 11 ($MM) Credit Card Student Loans Personal Loans Other Total Loans Balance at January 1, 2020 4,550 653 613 28 5,844 Reserve rate 5.90% 6.76% 7.97% N/A 6.09% Balance at September 30, 2021 $5,298 $857 $662 $44 $6,861 Reserve rate 7.54% 8.41% 9.61% N/A 7.66% Provision for credit losses 247 6 21 — 274 Net Charge-offs (272) (20) (21) — (313) Balance at December 31, 2021 $5,273 $843 $662 $44 $6,822 Reserve rate 7.09% 8.33% 9.54% N/A 7.28% 2022 Macroeconomic Assumptions Unemployment Rate ~4% by year-end Real GDP Growth Rate ∼3% Reserve Rate Trend 8.51% 8.01% 7.66% 7.28% Total Loans 1Q21 2Q21 3Q21 4Q21
12 47% 55% 62% 68% 23% 19% 13% 11%3%18% 14% 12% 10% 12% 12% 10% 11% DTC and Affinity Deposits Brokered & Other Deposits Short-term Borrowings Securitized Borrowing Unsecured Borrowing 4Q18 4Q19 4Q20 4Q21 Capital and Funding Funding Mix (%), Average Balance (3) 11.2 11.3 11.7 12.2 13.1 14.9 15.7 15.5 14.8 77 99 165 123 76 22 23 38 51 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Capital Trends Common Equity Tier 1 (CET1) Capital Ratio(1) (%) TTM Payout Ratio(2) (%) Note(s) 1. Based on the final rule published September 30, 2020. Capital ratios reflect delay in the recognition of the impact of CECL reserves on regulatory capital for two years in accordance with the final rule 2. Payout Ratio is displayed on a trailing twelve month basis. This represents the trailing twelve months’ Capital Return to Common Stockholders divided by the trailing twelve months’ Net Income Allocated to Common Stockholders 3. DTC and Affinity Deposits include checking and reflect both interest-bearing and non-interest bearing consumer deposits
13 2021 Actual 2022 Perspective Loan Growth 4% • Expect loan growth to be high single digits Net Interest Margin 10.76% • Expect NIM to be relatively flat to 2021 with quarter-to-quarter variability Operating Expense $4.8Bn • Expect total operating expense to be up mid-single digits Net Charge-offs 1.84% • Expect full year average net charge-off rate of 2.2-2.6% Capital Management $2.8Bn returned to shareholders • Expect to return significant excess capital to shareholders in 2022 and going forward
Appendix
Total Company Loans Credit Card Loans Private Student Loans Personal Loans 3.05 3.19 3.27 3.44 3.00 2.38 2.48 2.12 1.46 1.372.33 2.41 2.39 1.98 1.77 1.89 1.67 1.34 1.40 1.55 NCO rate (%) 30+ day DQ rate (%) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 3.32 3.41 3.65 3.90 3.45 2.63 2.80 2.45 1.65 1.502.50 2.62 2.62 2.17 1.91 2.07 1.85 1.43 1.48 1.66 NCO rate (%) 30+ day DQ rate (%) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 3.99 4.26 3.59 3.43 2.69 2.79 2.80 1.80 1.11 1.21 1.49 1.37 1.31 1.07 1.10 1.08 0.84 0.69 0.71 0.69 NCO rate (%) 30+ day DQ rate (%) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 0.59 1.02 0.68 0.62 0.58 0.71 0.53 0.53 0.68 0.80 1.93 1.88 1.75 1.57 1.49 1.39 1.20 1.34 1.55 1.55 NCO rate (%) 30+ day DQ rate (%) 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Credit Performance Trends 15
YOY YOY YOY YOY 4Q21 Payments Volume ($Bn) Discover Network • Discover Network volume was up 25% reflecting the increase in Discover card sales volume • PULSE volume up 18% YOY driven by increased spend related to the economic recovery • Diners volume up 17% from the prior year reflecting moderately better global T&E spending • Network Partners up 29% YOY driven by higher AribaPay volume Key Points $42.5 $39.2 $47.2 $49.4 $53.2 4Q20 1Q21 2Q21 3Q21 4Q21 $55.1 $60.4 $62.9 $59.9 $64.8 4Q20 1Q21 2Q21 3Q21 4Q21 $6.3 $5.9 $6.1 $6.5 $7.4 4Q20 1Q21 2Q21 3Q21 4Q21 $8.7 $9.6 $9.5 $10.4 $11.2 4Q20 1Q21 2Q21 3Q21 4Q21 Diners (1) PULSE Network Partners 25% 18% 17% 29% Note(s) 1. Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment Total Network Volume up 21% YOY 16
• 4Q21 sales volume up 31% vs 2019 with strong trends across all categories • Significant increase in: ◦ Gas reflecting higher pricing ◦ Restaurants as states have reopened and removed most restrictions ◦ Retail reflecting the continued economic recovery ◦ Travel improved despite variant concerns, but remains below historical mix keyrends in Key Points Sales Volume 17 Gas Groceries Retail Restaurants Services Travel Total Sales Volume Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -100% -50% 0% 50% 100% Monthly Sales Volume Trend 2021 vs. 2019 (%) FY20 Sales Mix FY21 Sales Mix 1Q21 2Q21 3Q21 4Q21 Gas 4% 5% 7% 9% 29% 42% Grocery 11% 9% 18% 24% 26% 28% Retail 40% 39% 37% 41% 38% 40% Restaurants 7% 8% 8% 30% 33% 41% Services 18% 18% 10% 20% 25% 29% Travel 4% 6% (41)% (8)% 1% 5% All Other 16% 15% 10% 14% 17% 16% Total Sales Volume 100% 100% 15% 24% 27% 31% Category Definitions • Services includes entertainment, auto, education, medical, and other service providers • All Other includes discount stores, drug stores, wholesale clubs, telecommunication, utilities, insurance, financial services and government Quarterly Sales Volume Trend 2021 vs. 2019 (%)
