Discover Financial Services (NYSE:DFS) Q4 2022 Earnings Call Transcript

Arren Cyganovich: On the marketing outlook, you had indicated that you expect to spend more than 2022 levels, which obviously was a very strong acquisition year for you. What’s the thought process there in terms of expecting to increase spend after such a strong year?

John Greene: Yes, great question. And you know what, I’m going to hit kind of give an overview on expenses and now I’ll specifically talk about kind of marketing and our thinking there. So, we said overall expenses would increase less than 10%. So, what that contemplates is a double-digit increase in marketing and single digits for the non-marketing spend. And what that reflects is, we continue to see opportunities to acquire profitable new accounts that are consistent with what we do. So that — in that prime revolver credit card. We also are intending to spend some money on the launch of the debit checking product. So that will include dollars for new accounts as well as advertising to bring awareness to the product. And then, it’s important to also kind of have a view on the marketing in that this is our guidance.

If we see the macroeconomic environment change or we don’t see ample opportunity to spend this money wisely then we will make calls in terms of the level of spend, and it could be less than what’s — what we’ve guided to. But overall, we’re very, very pleased with kind of our targeting and the effectiveness of the marketing and gave us confidence to continue to increase that.

Arren Cyganovich: And then on the personal loan side, you had indicated that it’s — it’s clear that it’s performing better than historically. With respect to the guidance, does the personal loan net charge-off rate, is that expected to go as high as credit cards in 2023? Or are you still expecting it to be somewhat better?

John Greene: Yes. I’m going to stick at the top level of the guidance we provided. And then, we give details by product in the supplement. I would use that information and impute kind of the charge-off rate there. But again, product has been performing very, very well, loss rates significantly below kind of what’s happening out in the industry. And it’s a kind of a — it’s a prime customer set. So that should give a view of kind of at least a way to think about expectations for that product.

Eric Wasserstrom: So, I think we’re going to conclude our call there. Any additional questions, please reach out to the IR team, and thanks very much for joining us this morning.

Operator: Thank you. This does conclude today’s call. We thank you for your participation. You may disconnect at any time.