Erin Stieber, Senior Vice President of Financial Planning and Analysis and Investor Relations, began the call by announcing Eric Wasserstrom's departure and highlighting his contributions to the company. She introduced the earnings presentation available on their website, noted the presence of forward-looking statements, and mentioned the recent financial performance and strategic priorities, including risk management and compliance improvements and the merger with Capital One. Interim CEO Michael Shepherd and CFO John Greene will also provide remarks, but there will be no Q&A session. They have made progress in selling the private student loan portfolio, completing the first two of four closings.

The paragraph discusses the end of a student loan disposition journey and the company's focus on a more specialized business model. It highlights improvements in risk management, compliance, and customer satisfaction, with Discover ranking highly for customer service according to J.D. Power. Discover celebrated the opening of a new customer care and community center in Whitehall, Ohio, and achieved its job creation goal in Chicago. Employee engagement and retention remain strong, earning the company recognition as a top workplace. The paragraph concludes with mention of an ongoing merger with Capital One, with integration planning progressing smoothly. Finally, John Greene is set to review the financial results for the third quarter of 2024.

In the quarter, the company reported strong financial results with a net income of $965 million, a 41% increase from the previous year. This performance was driven by revenue growth from higher loan balances, expansion of net interest margin, and a gain from the student loan portfolio sale. The net interest margin rose to 11.38%, primarily due to a lower card promotional balance mix. Card receivables increased by 3% year-over-year, while Discover card sales decreased by 3% due to cautious consumer behavior and credit tightening. Personal loans grew by 9%, reflecting high demand for debt consolidation, while the average FICO score for new accounts remained above 750. Student loans decreased by 19% due to asset sales, with 55% of the portfolio sold to date. Consumer deposits rose by 11% compared to the previous year.

The paragraph discusses the company's financial performance, emphasizing liquidity management through deposit balances and gains from student loan sales. Non-interest income increased by $76 million due to higher loan fee revenue and gains from the loan sale. Rewards rates improved, particularly in grocery and Walmart purchases. Operating expenses rose by 16% year-over-year, driven by increased compensation costs, technology investments, and merger-related expenses. The company expects significant risk management expenses in 2024. Credit performance saw a rise in net charge-offs, though card charge-offs improved against expectations, after adjusting for student loan reclassification.

The paragraph reports on financial performance indicators and economic conditions. Delinquencies for credit cards and personal loans have increased slightly but remain within expected norms, and card vintages from 2023 are performing as well as those from 2022, with 2024 anticipated to improve. Consumers appear stable but cautious due to inflation, adjusting spending to maintain budget management. Loan growth led to a $31 million increase in credit reserves, with a slight decrease in the reserve rate due to better credit performance and economic forecasts. The economic outlook projects a peak unemployment rate of 4.6% and GDP growth between 1-3% by the end of 2024. The common equity tier 1 ratio rose due to core earnings and asset sales, with a declared dividend of $0.70 per share. Additionally, there is an update on a regulatory review by the SEC regarding Discover's accounting methods.

The paragraph discusses efforts to resolve comments regarding the allocation of previous card misclassification charges, noting it won't impact historical earnings or liabilities. The 2024 outlook has been updated with revised expectations for loan growth, which is anticipated to decrease due to higher payment rates and lower card sales. Excluding student loan sales, low single-digit growth is expected. The net interest margin range has been adjusted to 11.2% to 11.4%, while operating expense guidance remains the same. Net charge-offs have been tightened to 4.9% to 5% due to better credit performance, and capital management expectations are unchanged. The company is focusing on strong financial results, business management, and preparing for a merger with Capital One. The call concludes with an invitation for questions.

This summary was generated with AI and may contain some inaccuracies.