UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 22, 2025
DISCOVER FINANCIAL SERVICES
(Exact name of registrant as specified in its charter)
Commission File Number: 001-33378
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| Delaware | | 36-2517428 |
(State or other jurisdiction
of incorporation) | | (IRS Employer
Identification No.) |
2500 Lake Cook Road, Riverwoods, Illinois 60015
(Address of principal executive offices, including zip code)
(224) 405-0900
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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| ☒ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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| Securities registered pursuant to Section 12(b) of the Act |
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| Common Stock, par value $0.01 per share | DFS | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On January 22, 2025, Discover Financial Services (the “Company”) released financial information with respect to the quarter ended December 31, 2024. Copies of the press release, financial data supplement and financial results presentation containing this information are attached hereto as exhibits and incorporated herein by reference.
The information contained in this Item 2.02 of this Current Report on Form 8-K, including the exhibits, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly stated by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
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| Exhibit No. | | Description |
| | Press Release of the Company dated January 22, 2025 containing financial information for the quarter ended December 31, 2024 |
| | Financial Data Supplement of the Company for the quarter and the Twelve Months Ended December 31, 2024 |
| | Financial Results Presentation of the Company for the quarter ended December 31, 2024 |
| 104 | | Cover Page Interactive Data File — the cover page from this Current Report on Form 8-K, formatted as Inline XBRL (included as Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | DISCOVER FINANCIAL SERVICES |
| | |
Dated: January 22, 2025 | | By: | | /s/ Efie Vainikos |
| | | | Name: Efie Vainikos |
| | | | Title: Assistant Secretary |
DISCOVER FINANCIAL SERVICES REPORTS FOURTH QUARTER 2024 NET INCOME OF $1.3 BILLION
OR $5.11 PER DILUTED SHARE AND FULL YEAR NET INCOME OF $4.5 BILLION OR $17.72 PER DILUTED SHARE
BOARD OF DIRECTORS DECLARES SEMI-ANNUAL DIVIDEND FOR PREFERRED STOCK AND QUARTERLY DIVIDEND FOR COMMON STOCK
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Fourh Quarter 2024 Results |
| 2024 | 2023 | YOY Change |
| Total loans, end of period (in billions) | $121.1 | $128.4 | (6%) |
| Total revenue net of interest expense (in millions) | $4,759 | $4,180 | 14% |
| Total net charge-off rate | 4.64% | 4.11% | 53 bps |
| Net income (in millions) | $1,291 | $366 | 253% |
| Diluted EPS | $5.11 | $1.45 | 252% |
Riverwoods, IL, January 22, 2025 - Discover Financial Services (NYSE: DFS) today reported net income of $1.3 billion or $5.11 per diluted share for the fourth quarter of 2024, as compared to a net income of $366 million or $1.45 per diluted share for the fourth quarter of 2023.
“Discover's fourth quarter results capped off a successful 2024 as loan growth, margin expansion, and credit improvement led to strong financial performance,” said Michael Shepherd, Discover’s Interim CEO and President. “It was a transformative year for our business as we announced our pending merger with Capital One, exited student lending, and enhanced our risk management and compliance programs. These actions position us well for the future."
Segment Results
Digital Banking
Digital Banking pretax income of $1.6 billion for the quarter was $1.2 billion higher than the prior year period reflecting a lower provision for credit losses and increased revenue net of interest expense partially offset by increased operating expenses.
Total loans ended the quarter at $121.1 billion, down 6% year-over-year, and down 5% sequentially. Average total loans were up 6% in 2024. Credit card loans ended the quarter at $102.8 billion, up 1% year-over-year, and Personal loans increased $462 million, or 5%. The private student loan sale was successfully completed.
Net interest income for the quarter increased $162 million, or 5% year-over-year, driven by net interest margin expansion. Net interest margin was 11.96%, up 98 basis points versus the prior year benefiting from the student loan sale. Card yield was 16.22%, up 59 basis points from the prior year primarily driven by a lower promotional balance mix, partially offset by a lower prime rate and higher interest charge-offs. Interest expense as a percentage of total loans would have declined as a result of lower market interest rates, however, the rate increased 5 basis points from the prior year period due to the loan sale.
Non-interest income increased $406 million, or 68% from the prior year period reflecting a $381 million gain from the loan sale.
The total net charge-off rate was 4.64%, up 53 basis points from the prior year period and down 22 basis points from the prior quarter reflecting continued seasoning of recent vintages. The credit card net charge-off rate was 5.03%, up 35 basis points from the prior year period and down 25 basis points from the prior quarter. The 30+ day delinquency rate for credit card loans was 3.84%, down 3 basis points year-over-year and flat from the prior quarter. The Personal loan net charge-off rate of 4.24% was up 85 basis points from the prior year and up 23 basis points from the prior quarter.
Provision for credit losses of $1.2 billion decreased $707 million from the prior year quarter driven by an $807 million favorable reserve change, partially offset by a $93 million increase in net charge-offs.
Total operating expenses were up $76 million year-over-year, or 4%. Employee compensation increased due to higher wage and benefit rates and employee retention actions. Professional fees were up from merger and integration and loan sale costs. Information processing increased due to technology investments and a software write-off pertaining to our student loan infrastructure. Other expenses and marketing were both down driven by higher costs in the fourth quarter of 2023, which included customer remediation and timing of broad market advertising.
Payment Services
Payment Services pretax income of $74 million was up $20 million year-over-year, or 37% primarily due to volume growth and timing of incentives. Payment Services volume was $102 billion, up 4% from the prior year period. PULSE dollar volume was up 7% driven by increased debit transaction volume. Diners Club volume was up 9% year-over-year reflecting strength in Israel and the Asia Pacific region, and Network Partners volume decreased 30% from the prior year due to lower AribaPay volume.
Dividend Declaration
The Board of Directors of Discover Financial Services declared a semi-annual cash dividend on its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series C, in the amount of $2,750 per share. The dividend equals $27.50 per depositary share, each representing 1/100th interest in a share of the Series C Preferred Stock. The dividend will be payable on April 30, 2025, to the holders of record at the close of business on April 15, 2025.
The Board of Directors of Discover Financial Services declared a semi-annual cash dividend on its Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series D, in the amount of $3,062.50 per share. The dividend equals $30.625 per depositary share, each representing 1/100th interest in a share of the Series D Preferred Stock. The dividend will be payable on March 24, 2025, to the holders of record at the close of business on March 7, 2025.
The Board of Directors declared a quarterly cash dividend of $0.70 per share of common stock payable on March 6, 2025, to the holders of record at the close of business on February 20, 2025.
Conference Call and Webcast Information
The company will host a conference call to discuss its fourth quarter results on Thursday, January 23, 2025, 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 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 merchants 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:
Erin Stieber, 224-405-4555 Matthew Towson, 224-405-5649
investorrelations@discover.com matthewtowson@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).
Forward Looking Statements
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,” “forecast,” and similar expressions. Such statements are based on the current beliefs and expectations of our 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: 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 accounting guidance, tax reform, financial regulatory reform, consumer financial services practices, anti-corruption and funding, capital and liquidity; risks related to the proposed merger with Capital One Financial Corporation (“Capital One”) including, among others, (i) failure to complete the merger with Capital One or unexpected delays related to the merger or the inability of the parties to obtain regulatory approvals or satisfy other closing conditions required to complete the merger, (ii) regulatory approvals resulting in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction, (iii) diversion of management’s attention from ongoing business operations and opportunities, (iv) cost and revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (v) the integration of each party’s management, personnel and operations will not be successfully achieved or may be materially delayed or will be more costly or difficult than expected, (vi) deposit attrition, customer or employee loss and/or revenue loss as a result of the announcement of the proposed merger, (vii) expenses related to the proposed merger being greater than expected, and (viii) shareholder litigation that could prevent or delay the closing of the proposed merger or otherwise negatively impact our business and operations; the actions and initiatives of current and potential competitors; our ability to manage our expenses; our ability to successfully achieve card acceptance across our networks and maintain relationships with network participants and merchants; our ability to sustain our card and personal loan growth; our ability to increase or sustain Discover card usage or attract new customers; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; our ability to manage our 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 our investment portfolio; limits on our ability to pay dividends and repurchase our common stock; limits on our ability to receive payments from our subsidiaries; fraudulent activities or material security breaches of our or others’ key systems; our ability to remain organizationally effective; our ability to maintain relationships with merchants; the effect of political, economic and market conditions, geopolitical events, climate change, pandemics and unforeseen or catastrophic events; our ability to introduce new products and services; our ability to manage our relationships with third-party vendors, as well as those with which we have no direct relationship such as our employees’ internet service providers; our ability to maintain current technology and integrate new and acquired systems and technology; our ability to collect amounts for disputed transactions from merchants and merchant acquirers; our ability to attract and retain employees; our ability to protect our reputation and our intellectual property; our ability to comply with regulatory requirements; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. We routinely evaluate and may pursue acquisitions of, investments in or divestitures from businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or our 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/A for the year ended December 31, 2023, 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.
Important Information About the Transaction and Where to Find It
Capital One has filed a registration statement on Form S-4 (No. 333-278812) with the SEC, which became effective on January 6, 2025, to register the shares of Capital One’s common stock that will be issued to Discover stockholders in connection with the proposed transaction. The registration statement includes a joint proxy statement of Capital One and Discover that also constitutes a prospectus of Capital One. The definitive joint proxy statement/prospectus has been sent to the stockholders of each of Discover and Capital One in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC by Discover or Capital One through the website maintained by the SEC at http://www.sec.gov or by contacting the investor relations department of Discover or Capital One at:
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| Discover Financial Services | | Capital One Financial Corporation |
| 2500 Lake Cook Road | | 1680 Capital One Drive |
| Riverwoods, IL 60015 | | McLean, VA 22102 |
| Attention: Investor Relations | | Attention: Investor Relations |
investorrelations@discover.com
(224) 405-4555 | | investorrelations@capitalone.com
(703) 720-1000 |
Before making any voting or investment decision, investors and security holders of Discover and Capital One are urged to read carefully the entire registration statement and joint proxy statement/prospectus, because they contain important information about the proposed transaction. Free copies of these documents may be obtained as described above.
Participants in Solicitation
Discover, Capital One and certain of their directors and executive officers may be deemed participants in the solicitation of proxies from the stockholders of each of Discover and Capital One in connection with the transaction. Information regarding the directors and executive officers of Discover and Capital One and other persons who may be deemed participants in the solicitation of the stockholders of Discover or of Capital One in connection with the transaction are included in the joint proxy statement/prospectus related to the proposed transaction, which was filed by Capital One with the SEC. Information about the directors and executive officers of Discover and their ownership of Discover common stock can also be found in Discover’s definitive proxy statement in connection with its 2024 annual meeting of stockholders, as filed with the SEC on March 15, 2024, as supplemented by Discover’s proxy statement supplement, as filed with the SEC on April 2, 2024, and other documents subsequently filed by Discover with the SEC. Information about the directors and executive officers of Capital One and their ownership of Capital One common stock can also be found in Capital One’s definitive proxy statement in connection with its 2024 annual meeting of stockholders, as filed with the SEC on March 20, 2024, and other documents subsequently filed by Capital One with the SEC. Additional information regarding the interests of such participants will be included in the joint proxy statement/prospectus and other relevant documents regarding the proposed transaction filed with the SEC when they become available.
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| DISCOVER FINANCIAL SERVICES | | | | | | | | | | | | | | | | | | | Exhibit 99.2 | | | | | | |
| EARNINGS SUMMARY | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (unaudited, in millions, except per share statistics) | | | | | | | | | | | | | | |
| | Quarter Ended | | | | | | Twelve Months Ended | | | | | | | | |
| | Dec 31, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 | | Dec 31, 2024 vs.
Dec 31, 2023 | | Dec 31, 2024 | | Dec 31, 2023 | | 2024 vs. 2023 | | | | | | |
| EARNINGS SUMMARY | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest Income | $4,989 | | | $5,112 | | | $4,971 | | | $4,948 | | | $4,868 | | | $121 | | | 2 | % | | $20,020 | | | $17,845 | | | $2,175 | | 12 | % | | | | | | | |
| Interest Expense | 1,359 | | | 1,457 | | | 1,447 | | | 1,461 | | | 1,400 | | | (41) | | | (3 | %) | | 5,724 | | | 4,746 | | | 978 | | 21 | % | | | | | | | |
| Net Interest Income | 3,630 | | | 3,655 | | | 3,524 | | | 3,487 | | | 3,468 | | | 162 | | | 5 | % | | 14,296 | | | 13,099 | | | 1,197 | | 9 | % | | | | | | | |
| Discount/Interchange Revenue | 1,157 | | | 1,142 | | | 1,153 | | | 1,024 | | | 1,142 | | | 15 | | | 1 | % | | 4,476 | | | 4,460 | | | 16 | | — | % | | | | | | | |
| Rewards Cost | 758 | | | 779 | | | 716 | | | 703 | | | 788 | | | (30) | | | (4 | %) | | 2,956 | | | 3,079 | | | (123) | | (4 | %) | | | | | | | |
| Discount and Interchange Revenue, net | 399 | | | 363 | | | 437 | | | 321 | | | 354 | | | 45 | | | 13 | % | | 1,520 | | | 1,381 | | | 139 | | 10 | % | | | | | | | |
| Protection Products Revenue | 43 | | | 42 | | | 42 | | | 42 | | | 43 | | | — | | | — | % | | 169 | | | 172 | | | (3) | | (2 | %) | | | | | | | |
| Loan Fee Income | 200 | | | 214 | | | 205 | | | 200 | | | 217 | | | (17) | | | (8 | %) | | 819 | | | 763 | | | 56 | | 7 | % | | | | | | | |
| Transaction Processing Revenue | 83 | | | 84 | | | 91 | | | 87 | | | 82 | | | 1 | | | 1 | % | | 345 | | | 303 | | | 42 | | 14 | % | | | | | | | |
| Other Income | 404 | | | 95 | | | 239 | | | 23 | | | 16 | | | 388 | | | NM | | 761 | | | 76 | | | 685 | | NM | | | | | | | |
| Total Non-Interest Income | 1,129 | | | 798 | | | 1,014 | | | 673 | | | 712 | | | 417 | | | 59 | % | | 3,614 | | | 2,695 | | | 919 | | 34 | % | | | | | | | |
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| Revenue Net of Interest Expense | 4,759 | | | 4,453 | | | 4,538 | | | 4,160 | | | 4,180 | | | 579 | | | 14 | % | | 17,910 | | | 15,794 | | | 2,116 | | 13 | % | | | | | | | |
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| Provision for Credit Losses | 1,202 | | | 1,473 | | | 739 | | | 1,497 | | | 1,909 | | | (707) | | | (37 | %) | | 4,911 | | | 6,018 | | | (1,107) | | (18 | %) | | | | | | | |
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| Employee Compensation and Benefits | 792 | | | 703 | | | 658 | | | 671 | | | 646 | | | 146 | | | 23 | % | | 2,824 | | | 2,434 | | | 390 | | 16 | % | | | | | | | |
| Marketing and Business Development | 299 | | | 263 | | | 258 | | | 250 | | | 372 | | | (73) | | | (20 | %) | | 1,070 | | | 1,164 | | | (94) | | (8 | %) | | | | | | | |
| Information Processing & Communications | 208 | | | 197 | | | 167 | | | 163 | | | 170 | | | 38 | | | 22 | % | | 735 | | | 608 | | | 127 | | 21 | % | | | | | | | |
| Professional Fees | 363 | | | 323 | | | 296 | | | 292 | | | 312 | | | 51 | | | 16 | % | | 1,274 | | | 1,041 | | | 233 | | 22 | % | | | | | | | |
| Premises and Equipment | 25 | | | 25 | | | 23 | | | 20 | | | 25 | | | — | | | — | % | | 93 | | | 89 | | | 4 | | 4 | % | | | | | | | |
| Other Expense | 168 | | | 277 | | | 336 | | | 148 | | | 263 | | | (95) | | | (36 | %) | | 929 | | | 803 | | | 126 | | 16 | % | | | | | | | |
| Total Operating Expense | 1,855 | | | 1,788 | | | 1,738 | | | 1,544 | | | 1,788 | | | 67 | | | 4 | % | | 6,925 | | | 6,139 | | | 786 | | 13 | % | | | | | | | |
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| Income/ (Loss) Before Income Taxes | 1,702 | | | 1,192 | | | 2,061 | | | 1,119 | | | 483 | | | 1,219 | | | 252 | % | | 6,074 | | | 3,637 | | | 2,437 | | 67 | % | | | | | | | |
| Tax Expense | 411 | | | 322 | | | 538 | | | 268 | | | 117 | | | 294 | | | 251 | % | | 1,539 | | | 841 | | | 698 | | 83 | % | | | | | | | |
| Net Income/ (Loss) | $1,291 | | | $870 | | | $1,523 | | | $851 | | | $366 | | | $925 | | | 253 | % | | $4,535 | | | $2,796 | | | $1,739 | | 62 | % | | | | | | | |
| Net Income/ (Loss) Allocated to Common Stockholders | $1,284 | | | $834 | | | $1,515 | | | $813 | | | $364 | | | $920 | | | 253 | % | | $4,446 | | | $2,715 | | | $1,731 | | 64 | % | | | | | | | |
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| Effective Tax Rate | 24.1 | % | | 27.0 | % | | 26.1 | % | | 24.0 | % | | 24.0 | % | | | | | | 25.3 | % | | 23.1 | % | | | | | | | | | | |
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| Net Interest Margin | 11.96 | % | | 11.38 | % | | 11.17 | % | | 11.03 | % | | 10.98 | % | | 98 | | | bps | | 11.38 | % | | 11.07 | % | | 31 | | bps | | | | | | | |
| Operating Efficiency | 39.0 | % | | 40.1 | % | | 38.3 | % | | 37.1 | % | | 42.8 | % | | (380) | | | bps | | 38.7 | % | | 38.9 | % | | (20) | | bps | | | | | | | |
| ROE | 29 | % | | 21 | % | | 40 | % | | 24 | % | | 10 | % | | | | | | 28 | % | | 20 | % | | | | | | | | | | |
| ROCE | 31 | % | | 23 | % | | 43 | % | | 8 | % | | 11 | % | | | | | | 30 | % | | 22 | % | | | | | | | | | | |
| Capital Returned to Common Stockholders | $160 | | | $155 | | | $178 | | | $180 | | | $144 | | | $16 | | | 11 | % | | $674 | | | $2,541 | | | ($1,867) | | (73 | %) | | | | | | | |
| Payout Ratio | 12 | % | | 19 | % | | 12 | % | | 22 | % | | 40 | % | | | | | | 15 | % | | 94 | % | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ending Common Shares Outstanding | 251 | | | 251 | | | 251 | | | 251 | | | 250 | | | 1 | | | — | % | | 251 | | | 250 | | | 1 | | — | % | | | | | | | |
| Weighted Average Common Shares Outstanding | 251 | | | 251 | | | 251 | | | 250 | | | 250 | | | 1 | | | — | % | | 251 | | | 254 | | | (3) | | (1 | %) | | | | | | | |
| Weighted Average Common Shares Outstanding (fully diluted) | 251 | | | 251 | | | 251 | | | 250 | | | 250 | | | 1 | | | — | % | | 251 | | | 254 | | | (3) | | (1 | %) | | | | | | | |
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| PER SHARE STATISTICS | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Basic EPS | $5.11 | | | $3.32 | | | $6.04 | | | $3.25 | | | $1.45 | | | $3.66 | | | 252 | % | | $17.72 | | | $10.71 | | | $7.01 | | 65 | % | | | | | | | |
| Diluted EPS | $5.11 | | | $3.32 | | | $6.03 | | | $3.25 | | | $1.45 | | | $3.66 | | | 252 | % | | $17.72 | | | $10.70 | | | $7.02 | | 66 | % | | | | | | | |
| Common Dividends Declared Per Share | $0.70 | | | $0.70 | | | $0.70 | | | $0.70 | | | $0.70 | | | $— | | | — | % | | $2.80 | | | $2.70 | | | $0.10 | | 4 | % | | | | | | | |
| Common Stock Price (period end) | $173.23 | | | $140.29 | | | $130.81 | | | $131.09 | | | $112.40 | | | $60.83 | | | 54 | % | | $173.23 | | | $112.40 | | | $60.83 | | 54 | % | | | | | | | |
| Book Value per share | $71.32 | | | $68.11 | | | $63.76 | | | $58.54 | | | $56.92 | | | $14.40 | | | 25 | % | | $71.32 | | | $56.92 | | | $14.40 | | 25 | % | | | | | | | |
|
| Note: See Glossary of Financial Terms for definitions of financial terms | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| DISCOVER FINANCIAL SERVICES |
| BALANCE SHEET SUMMARY |
| (unaudited, in millions) |
| | Quarter Ended | | | | |
| | Dec 31, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 | | Dec 31, 2024 vs.
Dec 31, 2023 |
| BALANCE SHEET SUMMARY | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | |
| Cash and Investment Securities | $28,552 | | | $26,423 | | | $24,405 | | | $27,965 | | | $25,383 | | | $3,169 | | | 12 | % |
| Loans Held-for-Sale | — | | | 8,484 | | | 10,145 | | | — | | | — | | | — | | | — | % |
| Loan Portfolio | 121,118 | | | 118,509 | | | 117,504 | | | 126,555 | | | 128,409 | | | (7,291) | | | (6 | %) |
| Total Loan Receivables | 121,118 | | | 126,993 | | | 127,649 | | | 126,555 | | | 128,409 | | | (7,291) | | | (6 | %) |
| Allowance for Credit Losses | (8,323) | | | (8,512) | | | (8,481) | | | (9,258) | | | (9,283) | | | 960 | | | 10 | % |
| Net Loan Receivables | 112,795 | | | 118,481 | | | 119,168 | | | 117,297 | | | 119,126 | | | (6,331) | | | (5 | %) |
| Premises and Equipment, net | 1,072 | | | 1,085 | | | 1,087 | | | 1,107 | | | 1,091 | | | (19) | | | (2 | %) |
| Goodwill and Intangible Assets, net | 255 | | | 255 | | | 255 | | | 255 | | | 255 | | | — | | | — | % |
| Other Assets | 4,966 | | | 5,371 | | | 5,973 | | | 6,083 | | | 5,858 | | | (892) | | | (15 | %) |
| Total Assets | $147,640 | | | $151,615 | | | $150,888 | | | $152,707 | | | $151,713 | | | ($4,073) | | | (3 | %) |
| | | | | | | | | | | | | |
| Liabilities & Stockholders' Equity | | | | | | | | | | | | | |
Certificates of Deposits 1 | 29,296 | | | 30,296 | | | 25,881 | | | 25,921 | | | 24,151 | | | 5,145 | | | 21 | % |
Savings, Money Market, and Other Deposits 1, 2 | 61,316 | | | 60,013 | | | 61,414 | | | 61,412 | | | 59,882 | | | 1,434 | | | 2 | % |
Total Direct to Consumer Deposits 1, 2 | 90,612 | | | 90,309 | | | 87,295 | | | 87,333 | | | 84,033 | | | 6,579 | | | 8 | % |
| Brokered Deposits and Other Deposits | 16,397 | | | 19,543 | | | 21,055 | | | 23,097 | | | 24,898 | | | (8,501) | | | (34 | %) |
| Deposits | 107,009 | | | 109,852 | | | 108,350 | | | 110,430 | | | 108,931 | | | (1,922) | | | (2 | %) |
Securitized Borrowings 3 | 8,475 | | | 9,307 | | | 9,608 | | | 10,933 | | | 11,743 | | | (3,268) | | | (28 | %) |
Other Borrowings 3 | 7,778 | | | 8,870 | | | 9,533 | | | 9,542 | | | 9,588 | | | (1,810) | | | (19 | %) |
| Borrowings | 16,253 | | | 18,177 | | | 19,141 | | | 20,475 | | | 21,331 | | | (5,078) | | | (24 | %) |
| Accrued Expenses and Other Liabilities | 6,452 | | | 6,477 | | | 7,387 | | | 7,132 | | | 7,216 | | | (764) | | | (11 | %) |
| Total Liabilities | 129,714 | | | 134,506 | | | 134,878 | | | 138,037 | | | 137,478 | | | (7,764) | | | (6 | %) |
| Total Equity | 17,926 | | | 17,109 | | | 16,010 | | | 14,670 | | | 14,235 | | | 3,691 | | | 26 | % |
| Total Liabilities and Stockholders' Equity | $147,640 | | | $151,615 | | | $150,888 | | | $152,707 | | | $151,713 | | | ($4,073) | | | (3 | %) |
| | | | | | | | | | | | | |
| LIQUIDITY | | | | | | | | | | | | | |
| Liquidity Portfolio | $27,325 | | | $24,804 | | | $22,371 | | | $25,739 | | | $23,254 | | | $4,071 | | | 18 | % |
| Private Asset-backed Securitization Capacity | 3,500 | | | 2,750 | | | 3,500 | | | 3,500 | | | 2,750 | | | 750 | | | 27 | % |
| Federal Home Loan Bank Borrowing Capacity | 4,679 | | | 3,853 | | | 3,383 | | | 3,087 | | | 2,551 | | | 2,128 | | | 83 | % |
Federal Reserve Discount Window 4 | 46,489 | | | 46,118 | | | 39,569 | | | 41,710 | | | 41,199 | | | 5,290 | | | 13 | % |
Undrawn Credit Facilities 4 | 54,668 | | | 52,721 | | | 46,452 | | | 48,297 | | | 46,500 | | | 8,168 | | | 18 | % |
| Total Liquidity | $81,993 | | | $77,525 | | $68,823 | | $74,036 | | $69,754 | | $12,239 | | 18 | % |
| | | | | | | | | | | | | |
| ¹ Includes Affinity relationships |
| ² Savings, Money Market, and Other Deposits and reflects both interest-bearing and non-interest bearing direct to consumer deposits |
| ³ Includes short-term and long-term borrowings |
| ⁴ 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, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 | | Dec 31, 2024 vs.
Dec 31, 2023 | |
| BALANCE SHEET STATISTICS | | | | | | | | | | | | | | |
| Total Common Equity | $16,870 | | | $16,053 | | | $14,954 | | | $13,614 | | | $13,179 | | | $3,691 | | | 28 | % | |
| Total Common Equity/Total Assets | 11.4 | % | | 10.6 | % | | 9.9 | % | | 8.9 | % | | 8.7 | % | | | | | |
| Total Common Equity/Net Loans | 15.0 | % | | 13.5 | % | | 12.5 | % | | 11.6 | % | | 11.1 | % | | | | | |
| | | | | | | | | | | | | | |
| Tangible Assets | $147,385 | | | $151,360 | | | $150,633 | | | $152,452 | | | $151,458 | | | ($4,073) | | | (3 | %) | |
Tangible Common Equity 1 | $16,615 | | | $15,798 | | | $14,699 | | | $13,359 | | | $12,924 | | | $3,691 | | | 29 | % | |
Tangible Common Equity/Tangible Assets 1 | 11.3 | % | | 10.4 | % | | 9.8 | % | | 8.8 | % | | 8.5 | % | | | | | |
Tangible Common Equity/Net Loans 1 | 14.7 | % | | 13.3 | % | | 12.3 | % | | 11.4 | % | | 10.8 | % | | | | | |
Tangible Common Equity per share 1 | $66.10 | | | $62.89 | | | $58.53 | | | $53.31 | | | $51.67 | | | $14.43 | | | 28 | % | |
| | | | | | | | | | | | | | |
| Basel III | | | | | |
| Quarter Ended | | | | | |
REGULATORY CAPITAL RATIOS 2 | Dec 31, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 | | | | | |
| Total Risk Based Capital Ratio | 16.5 | % | | 14.9 | % | | 14.2 | % | | 13.3 | % | | 13.2 | % | | | | | |
| Tier 1 Risk Based Capital Ratio | 15.0 | % | | 13.4 | % | | 12.6 | % | | 11.7 | % | | 11.6 | % | | | | | |
| Tier 1 Leverage Ratio | 12.3 | % | | 11.4 | % | | 11.1 | % | | 10.1 | % | | 10.3 | % | | | | | |
| Common Equity Tier 1 Capital Ratio | 14.1 | % | | 12.5 | % | | 11.8 | % | | 10.9 | % | | 10.8 | % | | | | | |
| | | | | | | | | | | | | | |
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 the impact of CECL reserves on regulatory capital with transition impacts | |
| Note: See Glossary of Financial Terms for definitions of financial terms | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| DISCOVER FINANCIAL SERVICES |
| AVERAGE BALANCE SHEET |
| (unaudited, in millions) |
| | Quarter Ended | | | | |
| | Dec 31, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 | | Dec 31, 2024 vs.
Dec 31, 2023 |
| AVERAGE BALANCES | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | |
| Cash and Investment Securities | $29,724 | | | $24,023 | | | $24,193 | | | $25,662 | | | $22,448 | | | $7,276 | | | 32 | % |
| Restricted Cash | 399 | | | 641 | | | 590 | | | 558 | | | 104 | | | 295 | | | NM |
| Credit Card Loans | 101,059 | | | 100,290 | | | 99,584 | | | 100,310 | | | 99,610 | | | 1,449 | | | 1 | % |
Private Student Loans 1 | 1,458 | | | 9,631 | | | 10,304 | | | 10,577 | | | 10,369 | | | (8,911) | | | (86 | %) |
| Personal Loans | 10,421 | | | 10,428 | | | 10,266 | | | 10,004 | | | 9,754 | | | 667 | | | 7 | % |
| Other Loans | 7,826 | | | 7,358 | | | 6,829 | | | 6,235 | | | 5,654 | | | 2,172 | | | 38 | % |
| Total Loans | 120,764 | | | 127,707 | | | 126,983 | | | 127,126 | | | 125,387 | | | (4,623) | | | (4 | %) |
| Total Interest Earning Assets | 150,887 | | | 152,371 | | | 151,766 | | | 153,346 | | | 147,939 | | | 2,948 | | | 2 | % |
| Allowance for Credit Losses | (8,510) | | | (8,480) | | | (9,245) | | | (9,279) | | | (8,668) | | | 158 | | | 2 | % |
| Other Assets | 7,401 | | | 7,756 | | | 7,953 | | | 7,709 | | | 7,462 | | | (61) | | | (1 | %) |
| Total Assets | $149,778 | | | $151,647 | | | $150,474 | | | $151,776 | | | $146,733 | | | $3,045 | | | 2 | % |
| | | | | | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | | | | | | |
Non-Interest-bearing Direct to Consumer Deposits 2 | $1,103 | | | $1,063 | | | $1,071 | | | $1,037 | | | $987 | | | $116 | | | 12 | % |
Certificates of Deposits 2 | 29,634 | | | 27,839 | | | 25,906 | | | 25,625 | | | 22,496 | | | 7,138 | | | 32 | % |
Savings, Money Market, and Other Deposits 2 | 59,571 | | | 59,258 | | | 59,973 | | | 59,212 | | | 58,766 | | | 805 | | | 1 | % |
Interest-bearing Direct to Consumer Deposits 2 | 89,205 | | | 87,097 | | | 85,879 | | | 84,837 | | | 81,262 | | | 7,943 | | | 10 | % |
| Brokered Deposits and Other Deposits | 17,515 | | | 20,189 | | | 21,631 | | | 23,792 | | | 23,271 | | | (5,756) | | | (25 | %) |
| Total Interest-bearing Deposits | 106,720 | | | 107,286 | | | 107,510 | | | 108,629 | | | 104,533 | | | 2,187 | | | 2 | % |
Securitized Borrowings 3 | 8,852 | | | 9,971 | | | 10,432 | | | 11,340 | | | 11,045 | | | (2,193) | | | (20 | %) |
Other Borrowings 3 | 8,098 | | | 9,416 | | | 9,521 | | | 9,572 | | | 9,228 | | | (1,130) | | | (12 | %) |
| Total Interest-bearing Liabilities | 123,670 | | | 126,673 | | | 127,463 | | | 129,541 | | | 124,806 | | | (1,136) | | | (1 | %) |
| Other Liabilities & Stockholders' Equity | 25,005 | | | 23,911 | | | 21,940 | | | 21,198 | | | 20,940 | | | 4,065 | | | 19 | % |
| Total Liabilities and Stockholders' Equity | $149,778 | | | $151,647 | | | $150,474 | | | $151,776 | | | $146,733 | | | $3,045 | | | 2 | % |
| | | | | | | | | | | | | |
| AVERAGE YIELD | | | | | | | | | | | | | |
| Assets | | | | | | | | | | | | | |
| Cash and Investment Securities | 4.24 | % | | 4.46 | % | | 4.51 | % | | 4.51 | % | | 4.36 | % | | (12) | | | bps |
| Restricted Cash | 5.69 | % | | 5.73 | % | | 8.33 | % | | 7.03 | % | | 16.71 | % | | (1,102) | | | bps |
| Credit Card Loans | 16.22 | % | | 16.23 | % | | 15.99 | % | | 15.79 | % | | 15.63 | % | | 59 | | | bps |
Private Student Loans 1 | 9.85 | % | | 10.08 | % | | 9.97 | % | | 10.04 | % | | 10.16 | % | | (31) | | | bps |
| Personal Loans | 13.84 | % | | 13.72 | % | | 13.60 | % | | 13.40 | % | | 13.20 | % | | 64 | | | bps |
| Other Loans | 7.50 | % | | 7.45 | % | | 7.45 | % | | 7.39 | % | | 7.14 | % | | 36 | | | bps |
| Total Loans | 15.37 | % | | 15.06 | % | | 14.85 | % | | 14.71 | % | | 14.61 | % | | 76 | | | bps |
| Total Interest Earning Assets | 13.15 | % | | 13.35 | % | | 13.18 | % | | 12.98 | % | | 13.05 | % | | 10 | | | bps |
| | | | | | | | | | | | | |
| AVERAGE RATES | | | | | | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | | | | | | |
Certificates of Deposits 2 | 4.61 | % | | 4.67 | % | | 4.62 | % | | 4.53 | % | | 4.24 | % | | 37 | | | bps |
Savings, Money Market, and Other Deposits 2 | 3.99 | % | | 4.27 | % | | 4.29 | % | | 4.35 | % | | 4.39 | % | | (40) | | | bps |
Interest-bearing Direct to Consumer Deposits 2 | 4.19 | % | | 4.40 | % | | 4.39 | % | | 4.41 | % | | 4.35 | % | | (16) | | | bps |
| Brokered Deposits and Other Deposits | 4.76 | % | | 4.95 | % | | 4.85 | % | | 4.75 | % | | 4.64 | % | | 12 | | | bps |
| Total Interest-bearing Deposits | 4.29 | % | | 4.50 | % | | 4.48 | % | | 4.48 | % | | 4.41 | % | | (12) | | | bps |
Securitized Borrowings 3 | 4.60 | % | | 4.81 | % | | 4.89 | % | | 4.71 | % | | 4.68 | % | | (8) | | | bps |
Other Borrowings 3 | 5.24 | % | | 5.23 | % | | 5.12 | % | | 4.94 | % | | 4.55 | % | | 69 | | | bps |
| Total Interest-bearing Liabilities | 4.37 | % | | 4.58 | % | | 4.56 | % | | 4.54 | % | | 4.45 | % | | (8) | | | bps |
| Net Interest Margin | 11.96 | % | | 11.38 | % | | 11.17 | % | | 11.03 | % | | 10.98 | % | | 98 | | | bps |
| Net Yield on Interest-earning Assets | 9.57 | % | | 9.54 | % | | 9.34 | % | | 9.15 | % | | 9.30 | % | | 27 | | | bps |
| | | | | | | | | | | | | |
1 Private student loans were classified as held-for-sale effective June 30, 2024, and subsequently completed the sale during the fourth quarter of 2024 |
2 Includes Affinity relationships |
3 Includes short-term and long-term borrowings |
| 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, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 | | Dec 31, 2024 vs.
Dec 31, 2023 | | Dec 31, 2024 | | Dec 31, 2023 | | 2024 vs. 2023 |
| TOTAL LOAN RECEIVABLES | | | | | | | | | | | | | | | | | | | | |
Ending Loans 1 | $121,118 | | | $126,993 | | | $127,649 | | | $126,555 | | | $128,409 | | | ($7,291) | | | (6 | %) | | $121,118 | | | $128,409 | | | ($7,291) | | (6 | %) |
Average Loans 1 | $120,764 | | | $127,707 | | | $126,983 | | | $127,126 | | | $125,387 | | | ($4,623) | | | (4 | %) | | $125,638 | | | $118,311 | | | $7,327 | | 6 | % |
| | | | | | | | | | | | | | | | | | | | |
Interest Yield 1 | 15.37 | % | | 15.06 | % | | 14.85 | % | | 14.71 | % | | 14.61 | % | | 76 | | | bps | | 14.99 | % | | 14.33 | % | | 66 | | bps |
Gross Principal Charge-off Rate 2 | 5.77 | % | | 5.91 | % | | 5.77 | % | | 5.74 | % | | 4.82 | % | | 95 | | | bps | | 5.80 | % | | 4.17 | % | | 163 | | bps |
Net Principal Charge-off Rate 2 | 4.64 | % | | 4.86 | % | | 4.83 | % | | 4.92 | % | | 4.11 | % | | 53 | | | bps | | 4.81 | % | | 3.42 | % | | 139 | | bps |
Delinquency Rate (30 or more days) 2 | 3.48 | % | | 3.46 | % | | 3.33 | % | | 3.38 | % | | 3.45 | % | | 3 | | | bps | | 3.48 | % | | 3.45 | % | | 3 | | bps |
Delinquency Rate (90 or more days) 2 | 1.71 | % | | 1.65 | % | | 1.62 | % | | 1.64 | % | | 1.59 | % | | 12 | | | bps | | 1.71 | % | | 1.59 | % | | 12 | | bps |
Gross Principal Charge-off Dollars 2 | $1,730 | | | $1,756 | | | $1,820 | | | $1,812 | | | $1,521 | | | $209 | | | 14 | % | | $7,118 | | | $4,927 | | | $2,191 | | 44 | % |
Net Principal Charge-off Dollars 2 | $1,391 | | | $1,442 | | | $1,522 | | | $1,556 | | | $1,298 | | | $93 | | | 7 | % | | $5,911 | | | $4,042 | | | $1,869 | | 46 | % |
Net Interest and Fee Charge-off Dollars 2 | $334 | | | $335 | | | $344 | | | $348 | | | $279 | | | $55 | | | 20 | % | | $1,361 | | | $873 | | | $488 | | 56 | % |
Loans Delinquent 30 or more days 2 | $4,216 | | | $4,105 | | | $3,917 | | | $4,282 | | | $4,427 | | | ($211) | | | (5 | %) | | $4,216 | | | $4,427 | | | ($211) | | (5 | %) |
Loans Delinquent 90 or more days 2 | $2,071 | | | $1,960 | | | $1,903 | | | $2,079 | | | $2,045 | | | $26 | | | 1 | % | | $2,071 | | | $2,045 | | | $26 | | 1 | % |
| | | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses (period end) | $8,323 | | | $8,512 | | | $8,481 | | | $9,258 | | | $9,283 | | | ($960) | | | (10 | %) | | $8,323 | | | $9,283 | | | ($960) | | (10 | %) |
Reserve Change Build/ (Release) 3, 4 | ($189) | | | $31 | | | ($777) | | | ($25) | | | $618 | | | ($807) | | | | | ($960) | | | $1,977 | | | ($2,937) | | |
Reserve Rate 2 | 6.87 | % | | 7.18 | % | | 7.22 | % | | 7.32 | % | | 7.23 | % | | (36) | | | bps | | 6.87 | % | | 7.23 | % | | (36) | | bps |
| | | | | | | | | | | | | | | | | | | | |
| CREDIT CARD LOANS | | | | | | | | | | | | | | | | | | | | |
| Ending Loans | $102,786 | | | $100,489 | | | $100,066 | | | $99,475 | | | $102,259 | | | $527 | | | 1 | % | | $102,786 | | | $102,259 | | | $527 | | 1 | % |
| Average Loans | $101,059 | | | $100,290 | | | $99,584 | | | $100,310 | | | $99,610 | | | $1,449 | | | 1 | % | | $100,313 | | | $94,205 | | | $6,108 | | 6 | % |
| | | | | | | | | | | | | | | | | | | | |
| Interest Yield | 16.22 | % | | 16.23 | % | | 15.99 | % | | 15.79 | % | | 15.63 | % | | 59 | | | bps | | 16.06 | % | | 15.33 | % | | 73 | | bps |
| Gross Principal Charge-off Rate | 6.28 | % | | 6.46 | % | | 6.66 | % | | 6.61 | % | | 5.50 | % | | 78 | | | bps | | 6.50 | % | | 4.76 | % | | 174 | | bps |
| Net Principal Charge-off Rate | 5.03 | % | | 5.28 | % | | 5.55 | % | | 5.66 | % | | 4.68 | % | | 35 | | | bps | | 5.38 | % | | 3.90 | % | | 148 | | bps |
| Delinquency Rate (30 or more days) | 3.84 | % | | 3.84 | % | | 3.69 | % | | 3.83 | % | | 3.87 | % | | (3) | | | bps | | 3.84 | % | | 3.87 | % | | (3) | | bps |
| Delinquency Rate (90 or more days) | 1.93 | % | | 1.87 | % | | 1.83 | % | | 1.95 | % | | 1.87 | % | | 6 | | | bps | | 1.93 | % | | 1.87 | % | | 6 | | bps |
| Gross Principal Charge-off Dollars | $1,596 | | | $1,629 | | | $1,648 | | | $1,649 | | | $1,380 | | | $216 | | | 16 | % | | $6,522 | | | $4,481 | | | $2,041 | | 46 | % |
| Net Principal Charge-off Dollars | $1,278 | | | $1,332 | | | $1,373 | | | $1,411 | | | $1,175 | | | $103 | | | 9 | % | | $5,394 | | | $3,674 | | | $1,720 | | 47 | % |
| Loans Delinquent 30 or more days | $3,944 | | | $3,857 | | | $3,697 | | | $3,810 | | | $3,955 | | | ($11) | | | — | % | | $3,944 | | | $3,955 | | | ($11) | | — | % |
| Loans Delinquent 90 or more days | $1,980 | | | $1,883 | | | $1,834 | | | $1,941 | | | $1,917 | | | $63 | | | 3 | % | | $1,980 | | | $1,917 | | | $63 | | 3 | % |
| | | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses (period end) | $7,403 | | | $7,586 | | | $7,591 | | | $7,541 | | | $7,619 | | | ($216) | | | (3 | %) | | $7,403 | | | $7,619 | | | ($216) | | (3 | %) |
Reserve Change Build/ (Release) 4 | ($183) | | | ($5) | | | $50 | | | ($78) | | | $549 | | | ($732) | | | | | ($216) | | | $1,802 | | | ($2,018) | | |
| Reserve Rate | 7.20 | % | | 7.55 | % | | 7.59 | % | | 7.58 | % | | 7.45 | % | | (25) | | | bps | | 7.20 | % | | 7.45 | % | | (25) | | bps |
| Total Discover Card Volume | $58,306 | | | $56,593 | | | $56,441 | | | $53,239 | | | $60,917 | | | ($2,611) | | | (4 | %) | | $224,579 | | | $232,785 | | | ($8,206) | | (4 | %) |
| Discover Card Sales Volume | $55,252 | | | $53,380 | | | $53,482 | | | $50,137 | | | $57,145 | | | ($1,893) | | | (3 | %) | | $212,251 | | | $217,914 | | | ($5,663) | | (3 | %) |
| Rewards Rate | 1.35 | % | | 1.44 | % | | 1.32 | % | | 1.39 | % | | 1.37 | % | | (2) | | | bps | | 1.38 | % | | 1.40 | % | | (2) | | bps |
| | | | | | | | | | | | | | | | | | | | |
1 Total Loans includes private student loans, home equity and other loans |
2 Excludes loans classified as held-for-sale as of June 30, 2024 |
3 Includes the adjustment to eliminate the allowance for credit losses upon classifying the private student loan portfolio as held-for-sale as of June 30, 2024 |
4 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, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 | | Dec 31, 2024 vs.
Dec 31, 2023 | | Dec 31, 2024 | | Dec 31, 2023 | | 2024 vs. 2023 |
PRIVATE STUDENT LOANS 1 | | | | | | | | | | | | | | | | | | | | |
| Organic Student Loans | $— | | | $8,101 | | | $9,740 | | | $10,050 | | | $9,894 | | | ($9,894) | | | (100 | %) | | $— | | | $9,894 | | | ($9,894) | | (100 | %) |
| Purchased Student Loans | — | | | 383 | | | 405 | | | 430 | | | 458 | | | (458) | | | (100 | %) | | — | | | 458 | | | (458) | | (100 | %) |
| Total Private Student Loans | $— | | | $8,484 | | | $10,145 | | | $10,480 | | | $10,352 | | | ($10,352) | | | (100 | %) | | $— | | | $10,352 | | | ($10,352) | | (100 | %) |
| | | | | | | | | | | | | | | | | | | | |
| Interest Yield | 9.85 | % | | 10.08 | % | | 9.97 | % | | 10.04 | % | | 10.16 | % | | (31) | | | bps | | 10.02 | % | | 9.95 | % | | 7 | | bps |
Net Principal Charge-off Rate 2 | N/A | | N/A | | 1.85 | % | | 1.58 | % | | 1.52 | % | | NM | | | | 1.72 | % | | 1.29 | % | | 43 | | bps |
Delinquency Rate (30 or more days) 2 | N/A | | N/A | | N/A | | 2.59 | % | | 2.62 | % | | NM | | | | N/A | | 2.62 | % | | NM | |
| | | | | | | | | | | | | | | | | | | | |
Reserve Rate 3 | N/A | | N/A | | N/A | | 8.29 | % | | 8.29 | % | | NM | | | | N/A | | 8.29 | % | | NM | |
| | | | | | | | | | | | | | | | | | | | |
| PERSONAL LOANS | | | | | | | | | | | | | | | | | | | | |
| Ending Loans | $10,314 | | | $10,438 | | | $10,321 | | | $10,107 | | | $9,852 | | | $462 | | | 5 | % | | $10,314 | | | $9,852 | | | $462 | | 5 | % |
| | | | | | | | | | | | | | | | | | | | |
| Interest Yield | 13.84 | % | | 13.72 | % | | 13.60 | % | | 13.40 | % | | 13.20 | % | | 64 | | | bps | | 13.64 | % | | 12.83 | % | | 81 | | bps |
| Net Principal Charge-off Rate | 4.24 | % | | 4.01 | % | | 3.98 | % | | 4.02 | % | | 3.39 | % | | 85 | | | bps | | 4.06 | % | | 2.60 | % | | 146 | | bps |
| Delinquency Rate (30 or more days) | 1.69 | % | | 1.66 | % | | 1.54 | % | | 1.46 | % | | 1.45 | % | | 24 | | | bps | | 1.69 | % | | 1.45 | % | | 24 | | bps |
| | | | | | | | | | | | | | | | | | | | |
| Reserve Rate | 7.56 | % | | 7.65 | % | | 7.68 | % | | 7.48 | % | | 7.33 | % | | 23 | | | bps | | 7.56 | % | | 7.33 | % | | 23 | | bps |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
1 Private student loans were classified as held-for-sale effective June 30, 2024, and subsequently completed the sale during the fourth quarter of 2024 |
2 Excludes loans classified as held-for-sale as of June 30, 2024 |
3 The allowance for credit losses was reversed upon classifying the private student loan portfolio as held-for-sale |
|
| 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, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 | | Dec 31, 2024 vs.
Dec 31, 2023 | | Dec 31, 2024 | | Dec 31, 2023 | | 2024 vs. 2023 |
| DIGITAL BANKING | | | | | | | | | | | | | | | | | | | | |
| Interest Income | $4,989 | | | $5,112 | | | $4,971 | | | $4,948 | | | $4,868 | | | $121 | | | 2 | % | | $20,020 | | | $17,845 | | | $2,175 | | 12 | % |
| Interest Expense | 1,359 | | | 1,457 | | | 1,447 | | | 1,461 | | | 1,400 | | | (41) | | | (3 | %) | | 5,724 | | | 4,746 | | | 978 | | 21 | % |
| Net Interest Income | 3,630 | | | 3,655 | | | 3,524 | | | 3,487 | | | 3,468 | | | 162 | | | 5 | % | | 14,296 | | | 13,099 | | | 1,197 | | 9 | % |
| Non-Interest Income | 1,001 | | | 669 | | | 691 | | | 541 | | | 595 | | | 406 | | | 68 | % | | 2,902 | | | 2,245 | | | 657 | | 29 | % |
| Revenue Net of Interest Expense | 4,631 | | | 4,324 | | | 4,215 | | | 4,028 | | | 4,063 | | | 568 | | | 14 | % | | 17,198 | | | 15,344 | | | 1,854 | | 12 | % |
| Provision for Credit Losses | 1,202 | | | 1,473 | | | 739 | | | 1,497 | | | 1,909 | | | (707) | | | (37 | %) | | 4,911 | | | 6,018 | | | (1,107) | | (18 | %) |
| Total Operating Expense | 1,801 | | | 1,743 | | | 1,692 | | | 1,494 | | | 1,725 | | | 76 | | | 4 | % | | 6,730 | | | 5,945 | | | 785 | | 13 | % |
| Income/ (Loss) Before Income Taxes | $1,628 | | | $1,108 | | | $1,784 | | | $1,037 | | | $429 | | | $1,199 | | | 279 | % | | $5,557 | | | $3,381 | | | $2,176 | | 64 | % |
| | | | | | | | | | | | | | | | | | | | |
| Net Interest Margin | 11.96 | % | | 11.38 | % | | 11.17 | % | | 11.03 | % | | 10.98 | % | | 98 | | | bps | | 11.38 | % | | 11.07 | % | | 31 | | bps |
| Pretax Return on Loan Receivables | 5.36 | % | | 3.45 | % | | 5.65 | % | | 3.28 | % | | 1.35 | % | | 401 | | | bps | | 4.42 | % | | 2.86 | % | | 156 | | bps |
| | | | | | | | | | | | | | | | | | | | |
| Allowance for Credit Losses (period end) | $8,323 | | | $8,512 | | | $8,481 | | | $9,258 | | | $9,283 | | | ($960) | | | (10 | %) | | $8,323 | | | $9,283 | | | ($960) | | (10 | %) |
| Reserve Change Build/ (Release) | ($189) | | | $31 | | | ($777) | | | ($25) | | | $618 | | | ($807) | | | | | ($960) | | | $1,977 | | | ($2,937) | | |
| | | | | | | | | | | | | | | | | | | | |
| PAYMENT SERVICES | | | | | | | | | | | | | | | | | | | | |
| Interest Income | $— | | | $— | | | $— | | | $— | | | $— | | | $— | | | — | % | | $— | | | $— | | | $— | | — | % |
| Interest Expense | — | | | — | | | — | | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | — | % |
| Net Interest Income | — | | | — | | | — | | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | — | % |
| Non-Interest Income (Loss) | 128 | | | 129 | | | 323 | | | 132 | | | 117 | | | 11 | | | 9 | % | | 712 | | | 450 | | | 262 | | 58 | % |
| Revenue Net of Interest Expense | 128 | | | 129 | | | 323 | | | 132 | | | 117 | | | 11 | | | 9 | % | | 712 | | | 450 | | | 262 | | 58 | % |
| Provision for Credit Losses | — | | | — | | | — | | | — | | | — | | | — | | | — | % | | — | | | — | | | — | | — | % |
| Total Operating Expense | 54 | | | 45 | | | 46 | | | 50 | | | 63 | | | (9) | | | (14 | %) | | 195 | | | 194 | | | 1 | | 1 | % |
| Income/ (Loss) Before Income Taxes | $74 | | | $84 | | | $277 | | | $82 | | | $54 | | | $20 | | | 37 | % | | $517 | | | $256 | | | $261 | | 102 | % |
| | | | | | | | | | | | | | | | | | | | |
| TRANSACTIONS PROCESSED ON NETWORKS | | | | | | | | | | | | | | | | | | | | |
| Discover Network | 977 | | | 954 | | | 936 | | | 883 | | | 974 | | | 3 | | | — | % | | 3,750 | | | 3,728 | | | 22 | | 1 | % |
| PULSE Network | 2,463 | | | 2,421 | | | 2,413 | | | 2,312 | | | 2,308 | | | 155 | | | 7 | % | | 9,609 | | | 7,705 | | | 1,904 | | 25 | % |
| Total | 3,440 | | | 3,375 | | | 3,349 | | | 3,195 | | | 3,282 | | | 158 | | | 5 | % | | 13,359 | | | 11,433 | | | 1,926 | | 17 | % |
| | | | | | | | | | | | | | | | | | | | |
| NETWORK VOLUME | | | | | | | | | | | | | | | | | | | | |
| PULSE Network | $84,900 | | | $82,573 | | | $81,749 | | | $79,073 | | | $79,194 | | | $5,706 | | | 7 | % | | $328,295 | | | $285,616 | | | $42,679 | | 15 | % |
| Network Partners | 6,081 | | | 7,512 | | | 8,111 | | | 11,070 | | | 8,736 | | | (2,655) | | | (30 | %) | | 32,774 | | | 39,671 | | | (6,897) | | (17 | %) |
Diners Club International 1 | 11,435 | | | 10,388 | | | 9,421 | | | 10,181 | | | 10,468 | | | 967 | | | 9 | % | | 41,425 | | | 39,299 | | | 2,126 | | 5 | % |
| Total Payment Services | 102,416 | | | 100,473 | | | 99,281 | | | 100,324 | | | 98,398 | | | 4,018 | | | 4 | % | | 402,494 | | | 364,586 | | | 37,908 | | 10 | % |
| Discover Network - Proprietary | 57,120 | | | 55,184 | | | 55,351 | | | 51,764 | | | 58,419 | | | (1,299) | | | (2) | % | | 219,419 | | | 224,572 | | | (5,153) | | (2) | % |
| Total | $159,536 | | | $155,657 | | | $154,632 | | | $152,088 | | | $156,817 | | | $2,719 | | | 2 | % | | $621,913 | | | $589,158 | | | $32,755 | | 6 | % |
| | | | | | | | | | | | | | | | | | | | |
1 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 Common Equity represents net income available for common stockholders (annualized) divided by average total common equity for the reporting period |
| | | |
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, 2024 | | Sep 30, 2024 | | Jun 30, 2024 | | Mar 31, 2024 | | Dec 31, 2023 |
| GAAP Total Common Equity | $16,870 | | | $16,053 | | | $14,954 | | | $13,614 | | | $13,179 | |
| Less: Goodwill | (255) | | | (255) | | | (255) | | | (255) | | | (255) | |
| Less: Intangibles | — | | | — | | | — | | | — | | | — | |
Tangible Common Equity 1 | $16,615 | | | $15,798 | | | $14,699 | | | $13,359 | | | $12,924 | |
| | | | | | | | | |
| GAAP Book Value Per Share | $71.32 | | | $68.11 | | | $63.76 | | | $58.54 | | | $56.92 | |
| Less: Goodwill | (1.02) | | | (1.02) | | | (1.02) | | | (1.02) | | | (1.03) | |
| Less: Intangibles | — | | | — | | | — | | | — | | | — | |
| Less: Preferred Stock | (4.20) | | | (4.20) | | | (4.21) | | | (4.21) | | | (4.22) | |
| Tangible Common Equity Per Share | $66.10 | | | $62.89 | | | $58.53 | | | $53.31 | | | $51.67 | |
| | | | | | | | | |
| 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 |
©2025 DISCOVER FINANCIAL SERVICES Exhibit 99.3 2024 & 4Q24 Financial Results January 22, 2025
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). Forward Looking Statements This presentation 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,” “forecast,” and similar expressions. Such statements are based on the current beliefs and expectations of our 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 presentation 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: 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 accounting guidance, tax reform, financial regulatory reform, consumer financial services practices, anti-corruption and funding, capital and liquidity; risks related to the proposed merger with Capital One Financial Corporation (“Capital One”) including, among others, (i) failure to complete the merger with Capital One or unexpected delays related to the merger or the inability of the parties to obtain regulatory approvals or satisfy other closing conditions required to complete the merger, (ii) regulatory approvals resulting in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction, (iii) diversion of management’s attention from ongoing business operations and opportunities, (iv) cost and revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (v) the integration of each party’s management, personnel and operations will not be successfully achieved or may be materially delayed or will be more costly or difficult than expected, (vi) deposit attrition, customer or employee loss and/or revenue loss as a result of the announcement of the proposed merger, (vii) expenses related to the proposed merger being greater than expected, and (viii) shareholder litigation that could prevent or delay the closing of the proposed merger or otherwise negatively impact our business and operations; the actions and initiatives of current and potential competitors; our ability to manage our expenses; our ability to successfully achieve card acceptance across our networks and maintain relationships with network participants and merchants; our ability to sustain our card and personal loan growth; our ability to increase or sustain Discover card usage or attract new customers; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; our ability to manage our 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 our investment portfolio; limits on our ability to pay dividends and repurchase our common stock; limits on our ability to receive payments from our subsidiaries; fraudulent activities or material security breaches of our or others’ key systems; our ability to remain organizationally effective; our ability to maintain relationships with merchants; the effect of political, economic and market conditions, geopolitical events, climate change, pandemics and unforeseen or catastrophic events; our ability to introduce new products and services; our ability to manage our relationships with third-party vendors, as well as those with which we have no direct relationship such as our employees’ internet service providers; our ability to maintain current technology and integrate new and acquired systems and technology; our ability to collect amounts for disputed transactions from merchants and merchant acquirers; our ability to attract and retain employees; our ability to protect our reputation and our intellectual property; our ability to comply with regulatory requirements; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. We routinely evaluate and may pursue acquisitions of, investments in or divestitures from businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or our 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/A for the year ended December 31, 2023, 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. Notice 2
Important Information About the Transaction and Where to Find It Capital One has filed a registration statement on Form S-4 (No. 333-278812) with the SEC, which became effective on January 6, 2025, to register the shares of Capital One’s common stock that will be issued to Discover stockholders in connection with the proposed transaction. The registration statement includes a joint proxy statement of Capital One and Discover that also constitutes a prospectus of Capital One. The definitive joint proxy statement/prospectus has been sent to the stockholders of each of Discover and Capital One in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS (AND ANY OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE INTO THE JOINT PROXY STATEMENT/PROSPECTUS) BECAUSE SUCH DOCUMENTS CONTAIN IMPORTANT INFORMATION REGARDING THE PROPOSED TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of these documents and other documents filed with the SEC by Discover or Capital One through the website maintained by the SEC at http://www.sec.gov or by contacting the investor relations department of Discover or Capital One at: Discover Financial Services Capital One Financial Corporation 2500 Lake Cook Road 1680 Capital One Drive Riverwoods, IL 60015 McLean, VA 22102 Attention: Investor Relations Attention: Investor Relations investorrelations@discover.com investorrelations@capitalone.com (224) 405-4555 (703) 720-1000 Before making any voting or investment decision, investors and security holders of Discover and Capital One are urged to read carefully the entire registration statement and joint proxy statement/prospectus, because they contain important information about the proposed transaction. Free copies of these documents may be obtained as described above. Participants in Solicitation Discover, Capital One and certain of their directors and executive officers may be deemed participants in the solicitation of proxies from the stockholders of each of Discover and Capital One in connection with the transaction. Information regarding the directors and executive officers of Discover and Capital One and other persons who may be deemed participants in the solicitation of the stockholders of Discover or of Capital One in connection with the transaction are included in the joint proxy statement/prospectus related to the proposed transaction, which was filed by Capital One with the SEC. Information about the directors and executive officers of Discover and their ownership of Discover common stock can also be found in Discover’s definitive proxy statement in connection with its 2024 annual meeting of stockholders, as filed with the SEC on March 15, 2024, as supplemented by Discover’s proxy statement supplement, as filed with the SEC on April 2, 2024, and other documents subsequently filed by Discover with the SEC. Information about the directors and executive officers of Capital One and their ownership of Capital One common stock can also be found in Capital One’s definitive proxy statement in connection with its 2024 annual meeting of stockholders, as filed with the SEC on March 20, 2024, and other documents subsequently filed by Capital One with the SEC. Additional information regarding the interests of such participants will be included in the joint proxy statement/ prospectus and other relevant documents regarding the proposed transaction filed with the SEC when they become available. Notice 3
2024 & 4Q24 Highlights 4 • 2024 net income of $4.5Bn; diluted EPS of $17.72, and return on equity of 28% ◦ 4Q24 net income of $1.3Bn; diluted EPS of $5.11 • Strong 2024 financial performance ◦ Card receivables grew 6% on average; ending consumer deposits grew 8% ◦ Credit began to improve ◦ Total network volume increased 6% • Drove transformative change while focusing on core competencies ◦ Entered merger agreement with Capital One ◦ Exited private student lending ◦ Progressed risk management and compliance capabilities ◦ Continued to deliver outstanding customer service • Merger with Capital One is steadily advancing ◦ Obtained merger approval from the Delaware State Bank Commissioner ◦ Definitive merger proxy was finalized; shareholder votes scheduled for February 18th Note(s) Merger with Capital One remains subject to numerous conditions including shareholder and regulatory approvals
• Revenue net of interest expense was $4.8Bn, up 14%, due to higher non-interest income reflecting a $381MM gain from the private student loan sale and higher net interest income • Provision for credit losses decreased by $707MM reflecting an $807MM favorable reserve change, partially offset by a $93MM increase in net charge-offs • Expenses increased $67MM, or 4%, from higher employee compensation, higher professional fees, and higher information processing 4Q24 Summary Financial Results Key Points 5 $366 $162 $417 $707 $(67) $(294) $1,291 4Q23 Net Income Net Interest Income Non- Interest Income Provision for Credit Losses Operating Expense Income Tax/ Capital Action 4Q24 Net Income Year-Over-Year Net Income & EPS ($MM, except EPS) 4Q24 $ 3,630 $ 1,129 $ 1,202 $ 1,855 $ 411 4Q23 $ 3,468 $ 712 $ 1,909 $ 1,788 $ 117 B/(W) $ 162 $ 417 $ 707 $ (67) $ (294) EPS $ 1.45 $ 0.49 $ 1.27 $ 2.15 $ (0.20) $ (0.05) $ 5.11 Note(s) Throughout this document, historical financial results have been restated / adjusted as disclosed in the Form 8-K dated December 23, 2024
• NIM on loans was 11.96%, up 58bps QOQ primarily driven by product mix and the investment of student loan sale proceeds • Total loan yield was up 31bps QOQ due to a favorable loan mix from the loan sale and lower card promotional balances • The net funding rate was down 26bps QOQ driven by lower average funding costs • Average consumer deposits were up 2% QOQ and up 10% YOY 4Q24 Net Interest Income Drivers 6 Key Points Note(s) 1. Includes checking and reflects both interest-bearing and non-interest bearing consumer deposits 2. Net Funding Rate reflects interest expense, net of interest income from other interest- earning assets, as a percentage of average receivables 10.98% 11.03% 11.17% 11.38% 11.96% 4Q23 1Q24 2Q24 3Q24 4Q24 NIM on Loans Total Loan Growth ($Bn) Funding Mix (%), Average Balance $102.3 $99.5 $100.1 $100.5 $102.8 $9.9 $10.1 $10.3 $10.4 $10.3 $5.9 $6.5 $7.1 $7.6 $8.0$10.4 $10.5 $10.1 $8.5 Card +1%YOY Personal +5% YOY Other + 35% YOY Student 4Q23 1Q24 2Q24 3Q24 4Q24 65% 66% 68% 69% 72% 18% 18% 17% 16% 14% 9% 9% 8% 8% 7% 8% 7% 7% 7% 7% DTC and Affinity Deposits Brokered & Other Deposits Securitized Borrowing Unsecured Borrowing 4Q23 1Q24 2Q24 3Q24 4Q24 Total Loan Yield 14.61% 14.71% 14.85% 15.06% 15.37% Net Funding Rate (2) 3.63% 3.68% 3.68% 3.67% 3.41% (1)
Note(s) 1. Rewards rate represents credit card rewards cost divided by Discover Card sales volume • Net interest income increased driven by margin expansion • Net discount / interchange revenue was up 13% from increased CashBack Debit volume and lower rewards • Loan fee income was down due to fewer instances • Other income increased reflecting a $381MM gain from the loan sale • The rewards rate was down 2bps YOY due to lower Cashback Match, mostly offset by higher spend in the 5% category 4Q24 Amazon, Target 4Q23 Amazon, Target 4Q24 Revenue 7 Key Points Inc / (Dec) ($MM) 4Q24 4Q23 $ % Net Interest Income 3,630 3,468 162 5% Net Discount/Interchange Revenue 399 354 45 13% Protection Products Revenue 43 43 — —% Loan Fee Income 200 217 (17) (8%) Transaction Processing Revenue 83 82 1 1% Other Income 404 16 388 NM Total Non-Interest Income 1,129 712 417 59% Revenue Net of Interest Expense $4,759 $4,180 $579 14% Change 4Q24 4Q23 QOQ YOY Discover Card Sales Volume ($MM) $55,252 $57,145 4 % (3%) Rewards Rate(1) 1.35 % 1.37 % (9) bps (2) bps $4,180 $162 $45 $(17) $1 $388 $4,759 4Q23 Rev Net of Int Exp Net Interest Income Net Discount/ Interchange Loan Fee Income Transaction Processing Other Income 4Q24 Rev Net of Int Exp Year-Over-Year Revenue ($MM)
Note(s) 1. Defined as reported total operating expense divided by revenue net of interest expense • Employee compensation increased due to higher wage & benefits rates, and retention actions • Marketing was lower reflecting higher 4Q23 spend from timing of broad market advertising • Information processing increased driven by technology investments and a $22MM student loan infrastructure write-off • Professional fees were up largely from $44MM of merger & integration and loan sale costs • Other expense fell as a result of 4Q23 customer remediation 4Q24 Operating Expense Inc / (Dec) ($MM) 4Q24 4Q23 $ % Employee Compensation and Benefits $792 $646 146 23% Marketing and Business Development 299 372 (73) (20%) Information Processing & Communications 208 170 38 22% Professional Fees 363 312 51 16% Premises and Equipment 25 25 — —% Other Expense 168 263 (95) (36%) Total Operating Expense $1,855 $1,788 $67 4% Operating Efficiency(1) 39.0 % 42.8 % (380) bps 8 Key PointsYear-Over-Year Expense ($MM) $1,788 $146 $(73) $38 $51 $(95) $1,855 4Q23 Expense Employee Comp Marketing Info Processing Professional Fees All Other 4Q24 Expense
• Credit card net charge-offs improved; delinquencies were stable • Personal loan net charge-off and delinquency rates increased reflecting continued seasoning of recent growth in loan balances • Total Loan net-charge-offs were slightly better than expectations 4Q24 Key Credit Metrics 9 Key PointsChange 4Q23 3Q24 4Q24 QOQ YOY Credit Card Loans Ending Loan Balance ($MM) $102,259 $100,489 $102,786 2% 1% Net Principal Charge-off Rate 4.68% 5.28% 5.03% (25) bps 35 bps 30-Day Delinquency Rate 3.87% 3.84% 3.84% 0 bps (3) bps Personal Loans Ending Loan Balance ($MM) $9,852 $10,438 $10,314 (1)% 5% Net Principal Charge-off Rate 3.39% 4.01% 4.24% 23 bps 85 bps 30-Day Delinquency Rate 1.45% 1.66% 1.69% 3 bps 24 bps Total Loans Ending Loan Balance ($MM)(1) $128,409 $126,993 $121,118 (5)% (6)% Net Principal Charge-off Rate(2) 4.11% 4.86% 4.64% (22) bps 53 bps 30-Day Delinquency Rate(2) 3.45% 3.46% 3.48% 2 bps 3 bps Note(s) 1. Total Loans includes private student loans, home equity and other loans; the student loan sale was completed in 4Q24 2. Excludes loans classified as held-for-sale as of June 30, 2024
10 ($MM) Credit Card Personal Loans Other Total Allowance Balance at September 30, 2024 $7,586 $798 $128 $8,512 Reserve rate 7.55% 7.65% N/A 7.18% Provision for credit losses 1,095 93 14 1,202 Net Charge-offs 1,278 111 2 1,391 Balance at December 31, 2024 $7,403 $780 $140 $8,323 Reserve rate 7.20% 7.56% N/A 6.87% 7.23% 7.32% 7.22% 7.18% 6.87% 4Q23 1Q24 2Q24 3Q24 4Q24 Allowance for Credit Losses Note(s) 1. Includes an adjustment to eliminate the allowance for credit losses upon classifying the private student loan portfolio as held-for-sale as of June 30,2024 Total Loan Reserve Rate(1)
$1.8 $0.3 $2.3 $2.4 $1.9 $— $0.44 $0.44 $0.50 $0.60 $0.70 $0.70 2019 2020 2021 2022 2023 2024 11 Capital Return(3)Capital Position Common Equity Tier 1 (CET1) Capital Ratio (%) Note(s) 1. Capital for years ended 2023 and prior have been restated for comparative purposes to reflect corrections to those periods related to the card product misclassification on the financial statements; years 2019-2021 reflect a best estimate 2. Based on the final rule published September 30, 2020. Capital ratios reflect the impact of CECL reserves on regulatory capital with transition impacts 3. Quarterly dividend per share figures for 2019 through 2024 represent year-end levels 10.7% 12.5% 14.1% 12.7% 10.8% 14.1% 2019 2020 2021 2022 2023 2024 • The Common Equity Tier 1 ratio of 14.1% increased due the student loan sale and core earnings generation • Declared quarterly cash dividend of $0.70 per share of common stock • Share repurchases have been suspended through merger closing and common dividends will not exceed $0.70 per share Key Points Capital Position & Capital Return Trends Share Repurchases ($Bn) Quarterly Dividend per Share (1)(2) Suspended through closing
12 2024 / 2025 Trends 3Q24 Outlook 2024 Actual 2025 Trend Loan Growth • Down low to mid single digits (5.7%) • Loan growth to align more closely with pre- pandemic norms Net Interest Margin • 11.2-11.4% 11.38% • Net interest margin to remain relatively consistent with the 4Q24 level Operating Expense • Up mid single digits excluding card misclassification and merger related costs 4.6% • No significant changes to our expense base prior to merger approval Net Charge-offs • 4.9-5.0% 4.81% • Beginning to see a downward trend Capital Management • Share repurchases suspended through merger closing; dividend not to exceed $0.70 per share Note(s) Operating Expense reflects $6.9Bn of total 2024 operating expense less $118 million of merger and integration costs and $386 million of card misclassification costs which includes the accrual for potential regulatory penalties of approximately $290 million
Appendix
4Q24 Asset Yield & Liabilities Rate 4Q24 3Q24 4Q23 Interest-Earning Assets ($Bn) Avg Bal Yield Avg Bal Yield Avg Bal Yield Total Loans $120.8 15.37 % $127.7 15.06 % $125.4 14.61 % Other Interest-Earning Assets 30.1 4.26 % 24.7 4.49 % 22.5 4.41 % Total Interest-Earning Assets $150.9 13.15 % $152.4 13.35 % $147.9 13.05 % 4Q24 3Q24 4Q23 Interest-Bearing Liabilities ($Bn) Avg Bal Rate Avg Bal Rate Avg Bal Rate Direct to Consumer Deposits(1) (2) $89.2 4.19 % $87.1 4.40 % $81.3 4.35 % Brokered Deposits and Other 17.5 4.76 % 20.2 4.95 % 23.3 4.64 % Interest Bearing-Deposits 106.7 4.29 % 107.3 4.50 % 104.5 4.41 % Borrowings 17.0 4.90 % 19.4 5.02 % 20.3 4.62 % Total Interest-Bearing Liabilities $123.7 4.37 % $126.7 4.58 % $124.8 4.45 % 14 Note(s) 1. Includes Affinity relationships 2. Excludes checking which is a non-interest bearing deposit product
Total Company Loans(1) Credit Card Loans Private Student Loans(1) Personal Loans 1.71 2.13 2.72 3.22 3.52 4.11 4.92 4.83 4.86 4.64 1.94 2.30 2.48 2.57 3.06 3.45 3.38 3.33 3.46 3.48 NCO rate (%) 30+ day DQ rate (%) 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1.92 2.37 3.10 3.68 4.03 4.68 5.66 5.55 5.28 5.03 2.11 2.53 2.76 2.86 3.41 3.87 3.83 3.69 3.84 3.84 NCO rate (%) 30+ day DQ rate (%) 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1.14 1.49 1.94 2.28 2.63 3.39 4.02 3.98 4.01 4.24 0.69 0.80 0.91 1.00 1.24 1.45 1.46 1.54 1.66 1.69 NCO rate (%) 30+ day DQ rate (%) 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 0.91 1.33 1.04 1.25 1.32 1.52 1.58 1.85 1.94 2.05 2.02 2.13 2.62 2.62 2.59 NCO rate (%) 30+ day DQ rate (%) 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 Credit Performance Trends 15 Note(s) 1. Excludes loans classified as held-for-sale as of June 30, 2024, and subsequently sold during the third and fourth quarters of 2024 Transferred to HFS / Sold
YOY YOY YOY YOY 4Q24 Payments Volume ($Bn) Discover Network • Discover Network volume was down 2% reflecting a slowdown in Discover card sales • PULSE volume was up 7% driven by an increase in debit transaction volume • Diners Club volume was up 9% YOY due to growth in Israel and the Asia Pacific region • Network Partners was down 30% YOY from lower AribaPay volume Key Points $58.4 $51.8 $55.4 $55.2 $57.1 4Q23 1Q24 2Q24 3Q24 4Q24 $79.2 $79.1 $81.7 $82.6 $84.9 4Q23 1Q24 2Q24 3Q24 4Q24 $10.5 $10.2 $9.4 $10.4 $11.4 4Q23 1Q24 2Q24 3Q24 4Q24 $8.7 $11.1 $8.1 $7.5 $6.1 4Q23 1Q24 2Q24 3Q24 4Q24 Diners Club(1) PULSE Network Partners (2)% 7% 9% (30)% 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 2% YOY 16
Grafico Azioni Discover Financial Servi... (NYSE:DFS)
Storico
Da Dic 2024 a Gen 2025
Grafico Azioni Discover Financial Servi... (NYSE:DFS)
Storico
Da Gen 2024 a Gen 2025
