Credit QualityCharge-off rate increased significantly year-over-year to 5.86%, indicating faster-than-expected seasoning of underperforming loan vintages.
EarningsBig credit and cost miss. DFS’s 4Q23 core EPS of $1.79 missed $2.58 consensus by -31%; much higher-than-expected provisions (card reserve build) and operating expenses (marketing spend) more than offset higher revenues (NII and fees).
GuidanceNotably disappointing guidance. DFS expects full-year 2024E NIM 10.5-10.8% (vs. 10.6% consensus), flat loan growth (+5% consensus), NCO rate 4.9-5.3% (4.4% consensus), and operating costs up mid-single-digits (in line).