Question: What was the change in dividend payout ratio between 2022 and 2023?

From 2022 to 2023, Discover’s payout ratio increased from approximately 14.9% to 23.9%.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations;Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 77: Our Board of Directors declared the following common stock dividends during 2023, 2022 and 2021:

Declaration Date		Record Date		Payment Date		Dividend per Share

2023

October 16, 2023		November 22, 2023		December 07, 2023		$	0.70

July 17, 2023		August 24, 2023		September 07, 2023		0.70

April 17, 2023		May 25, 2023		June 08, 2023		0.70

January 17, 2023		February 23, 2023		March 09, 2023		0.60

Total common stock dividends		$	2.70

2022

October 18, 2022		November 23, 2022		December 08, 2022		$	0.60

July 20, 2022		August 25, 2022		September 08, 2022		0.60

April 27, 2022		May 26, 2022		June 09, 2022		0.60

January 18, 2022		February 17, 2022		March 03, 2022		0.50

Total common stock dividends		$	2.30

2021

October 19, 2021		November 24, 2021		December 09, 2021		$	0.50

July 20, 2021		August 19, 2021		September 02, 2021		0.50

April 20, 2021		May 20, 2021		June 03, 2021		0.44

January 19, 2021		February 18, 2021		March 04, 2021		0.44

Total common stock dividends		$	1.88

On January 16, 2024, we declared a quarterly cash dividend on our common stock of $0.70 per share, payable on March 7, 2024 to holders of record on February 22, 2024, which is consistent with the quarterly amount paid in 2023.
Our Board of Directors declared the following Series C preferred stock dividends during 2023, 2022 and 2021:

Declaration Date		Record Date		Payment Date		Dividend per Depositary Share

2023

July 17, 2023		October 13, 2023		October 30, 2023		$	27.50

January 17, 2023		April 14, 2023		May 01, 2023		27.50

Total Series C preferred stock dividends		$	55.00

2022

July 20, 2022		October 14, 2022		October 31, 2022		$	27.50

January 18, 2022		April 15, 2022		May 02, 2022		27.50

Total Series C preferred stock dividends		$	55.00

2021

July 20, 2021		October 15, 2021		November 01, 2021		$	27.50

January 19, 2021		April 15, 2021		April 30, 2021		27.50

Total Series C preferred stock dividends		$	55.00

-77-

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 86:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-

Our Board of Directors declared the following common stock dividends during 2023, 2022 and 2021:

Declaration Date		Record Date		Payment Date		Dividend per Share

2023

October 16, 2023		November 22, 2023		December 07, 2023		$	0.70

July 17, 2023		August 24, 2023		September 07, 2023		0.70

April 17, 2023		May 25, 2023		June 08, 2023		0.70

January 17, 2023		February 23, 2023		March 09, 2023		0.60

Total common stock dividends		$	2.70

2022

October 18, 2022		November 23, 2022		December 08, 2022		$	0.60

July 20, 2022		August 25, 2022		September 08, 2022		0.60

April 27, 2022		May 26, 2022		June 09, 2022		0.60

January 18, 2022		February 17, 2022		March 03, 2022		0.50

Total common stock dividends		$	2.30

2021

October 19, 2021		November 24, 2021		December 09, 2021		$	0.50

July 20, 2021		August 19, 2021		September 02, 2021		0.50

April 20, 2021		May 20, 2021		June 03, 2021		0.44

January 19, 2021		February 18, 2021		March 04, 2021		0.44

Total common stock dividends		$	1.88

On January 16, 2024, we declared a quarterly cash dividend on our common stock of $0.70 per share, payable on March 7, 2024 to holders of record on February 22, 2024, which is consistent with the quarterly amount paid in 2023.
Our Board of Directors declared the following Series C preferred stock dividends during 2023, 2022 and 2021:

Declaration Date		Record Date		Payment Date		Dividend per Depositary Share

2023

July 17, 2023		October 13, 2023		October 30, 2023		$	27.50

January 17, 2023		April 14, 2023		May 01, 2023		27.50

Total Series C preferred stock dividends		$	55.00

2022

July 20, 2022		October 14, 2022		October 31, 2022		$	27.50

January 18, 2022		April 15, 2022		May 02, 2022		27.50

Total Series C preferred stock dividends		$	55.00

2021

July 20, 2021		October 15, 2021		November 01, 2021		$	27.50

January 19, 2021		April 15, 2021		April 30, 2021		27.50

Total Series C preferred stock dividends		$	55.00

-77-

,
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-


Question: What is Discover’s CET1 Ratio for 2023?

Below is the information on the Common Equity Tier 1 (CET1) capital ratios, calculated as the ratio of Common Equity Tier 1 Capital to Risk weighted Assets, for Discover Financial Services (DFS) and Discover Bank as of December 31, 2023:

Discover Financial Services (DFS)
CET1 Ratio: 11.3%

Discover Bank
CET1 Ratio: 10.8%

Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 125:
16.    Earnings Per Share

The following table presents the calculation of basic and diluted EPS (dollars and shares in millions, except per share amounts):

 	For the Years Ended December 31,

 	2023		2022		2021

Numerator

Net income	$	2,940 			$	4,374 			$	5,422

Preferred stock dividends	(62)			(62)			(69)

Net income available to common stockholders	2,878 			4,312 			5,353

Income allocated to participating securities	(19)			(26)			(30)

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Denominator

Weighted-average shares of common stock outstanding	254 			277 			300

Effect of dilutive common stock equivalents	- 			1 			-

Weighted-average shares of common stock outstanding and common stock equivalents	254 			278 			300

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

Anti-dilutive securities were not material and had no impact on the computation of diluted EPS for the years ended December 31, 2023, 2022 and 2021.

17.    Capital Adequacy

DFS is subject to the capital adequacy guidelines of the Federal Reserve. Discover Bank, the Company's banking subsidiary, is subject to various regulatory capital requirements as administered by the FDIC. Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could limit the Company's business activities and have a direct material effect on the financial condition and operating results of DFS and Discover Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, DFS and Discover Bank must meet specific risk-based capital requirements and leverage ratios that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory guidelines. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
DFS and Discover Bank are subject to regulatory and capital rules issued by the Federal Reserve and FDIC, respectively, under the Basel Committee's December 2010 framework ("Basel III rules"). Under the Basel III rules, DFS and Discover Bank are classified as "standardized approach" entities. Standardized approach entities are defined as U.S. banking organizations with consolidated total assets over $50 billion but not exceeding $250 billion and consolidated total on-balance sheet foreign exposure less than $10 billion.
In accordance with the final rule on the impact of CECL on regulatory capital, the Company has elected to phase in the impact over three years beginning in 2022. Accordingly, the Company's Common Equity Tier 1 ("CET1") capital ratios are higher than they otherwise would have been. The Company's CET1 capital ratios will continue to be favorably impacted by this election over the phase-in period, which ends December 31, 2024.
As of December 31, 2023 and 2022, DFS and Discover Bank met all Basel III minimum capital ratio requirements to which they were subject. DFS and Discover Bank also met the requirements to be considered "well-capitalized" under Regulation Y and prompt corrective action rules, respectively. There have been no conditions or events that management believes have changed DFS' or Discover Bank's category. To be categorized as "well-capitalized," DFS and Discover Bank must maintain minimum capital ratios outlined in the table below.
-125-

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 126: The following table shows the actual capital amounts and ratios of DFS and Discover Bank and comparisons of each to the regulatory minimum and "well-capitalized" requirements (dollars in millions):

 	Actual		Minimum CapitalRequirements		Capital RequirementsTo Be Classified asWell-Capitalized

 	Amount		Ratio(1)		Amount		Ratio		Amount(2)		Ratio(2)

December 31, 2023

Total capital (to risk-weighted assets)

Discover Financial Services	$	17,986 			13.7 	%		$	10,471 			≥8.0%		$	13,088 			≥10.0%

Discover Bank	$	16,856 			13.0 	%		$	10,352 			≥8.0%		$	12,939 			≥10.0%

Tier 1 capital (to risk-weighted assets)

Discover Financial Services	$	15,872 			12.1 	%		$	7,853 			≥6.0%		$	7,853 			≥6.0%

Discover Bank	$	13,910 			10.8 	%		$	7,764 			≥6.0%		$	10,352 			≥8.0%

Tier 1 capital (to average assets)

Discover Financial Services	$	15,872 			10.7 	%		$	5,915 			≥4.0%		N/A		N/A

Discover Bank	$	13,910 			9.5 	%		$	5,833 			≥4.0%		$	7,292 			≥5.0%

Common Equity Tier 1 (to risk-weighted assets)

Discover Financial Services	$	14,816 			11.3 	%		$	5,890 			≥4.5%		N/A		N/A

Discover Bank	$	13,910 			10.8 	%		$	5,823 			≥4.5%		$	8,411 			≥6.5%

December 31, 2022

Total capital (to risk-weighted assets)

Discover Financial Services(3)	$	18,004 			15.8 	%		$	9,139 			≥8.0%		$	11,424 			≥10.0%

Discover Bank(3)	$	16,344 			14.5 	%		$	9,024 			≥8.0%		$	11,280 			≥10.0%

Tier 1 capital (to risk-weighted assets)

Discover Financial Services(3)	$	16,039 			14.0 	%		$	6,854 			≥6.0%		$	6,854 			≥6.0%

Discover Bank(3)	$	13,446 			11.9 	%		$	6,768 			≥6.0%		$	9,024 			≥8.0%

Tier 1 capital (to average assets)

Discover Financial Services(3)	$	16,039 			12.5 	%		$	5,147 			≥4.0%		N/A		N/A

Discover Bank(3)	$	13,446 			10.6 	%		$	5,086 			≥4.0%		$	6,357 			≥5.0%

Common Equity Tier 1 (to risk-weighted assets)

Discover Financial Services(3)	$	14,983 			13.1 	%		$	5,141 			≥4.5%		N/A		N/A

Discover Bank(3)	$	13,446 			11.9 	%		$	5,076 			≥4.5%		$	7,332 			≥6.5%

(1)Capital ratios are calculated based on the Basel III standardized approach rules, subject to applicable transition provisions, including CECL transition provisions.
(2)The Basel III rules do not establish well-capitalized thresholds for these measures for bank holding companies. Existing well-capitalized thresholds established in the Federal Reserve's Regulation Y have been included where available.
(3)Capital amounts and ratios have been updated to reflect the impact of the restatement described in Note 26: Immaterial Restatement of Prior Period Financial Statements. Discover Bank capital amounts and ratios presented as of December 31, 2022 have been updated from amounts previously disclosed in the Company's Form 10-Q for the period ended September 30, 2023, due to certain intercompany allocations recorded in the fourth quarter.
The amount of dividends that a bank may pay in any year is subject to certain regulatory restrictions. Under the current banking regulations, a bank may not pay dividends if such a payment would leave the bank inadequately capitalized. Discover Bank paid dividends of $1.7 billion, $4.0 billion and $3.3 billion in the years ended December 31, 2023, 2022 and 2021, respectively, to DFS.
-126-

16.    Earnings Per Share

The following table presents the calculation of basic and diluted EPS (dollars and shares in millions, except per share amounts):

 	For the Years Ended December 31,

 	2023		2022		2021

Numerator

Net income	$	2,940 			$	4,374 			$	5,422

Preferred stock dividends	(62)			(62)			(69)

Net income available to common stockholders	2,878 			4,312 			5,353

Income allocated to participating securities	(19)			(26)			(30)

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Denominator

Weighted-average shares of common stock outstanding	254 			277 			300

Effect of dilutive common stock equivalents	- 			1 			-

Weighted-average shares of common stock outstanding and common stock equivalents	254 			278 			300

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

Anti-dilutive securities were not material and had no impact on the computation of diluted EPS for the years ended December 31, 2023, 2022 and 2021.

17.    Capital Adequacy

DFS is subject to the capital adequacy guidelines of the Federal Reserve. Discover Bank, the Company's banking subsidiary, is subject to various regulatory capital requirements as administered by the FDIC. Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could limit the Company's business activities and have a direct material effect on the financial condition and operating results of DFS and Discover Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, DFS and Discover Bank must meet specific risk-based capital requirements and leverage ratios that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory guidelines. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
DFS and Discover Bank are subject to regulatory and capital rules issued by the Federal Reserve and FDIC, respectively, under the Basel Committee's December 2010 framework ("Basel III rules"). Under the Basel III rules, DFS and Discover Bank are classified as "standardized approach" entities. Standardized approach entities are defined as U.S. banking organizations with consolidated total assets over $50 billion but not exceeding $250 billion and consolidated total on-balance sheet foreign exposure less than $10 billion.
In accordance with the final rule on the impact of CECL on regulatory capital, the Company has elected to phase in the impact over three years beginning in 2022. Accordingly, the Company's Common Equity Tier 1 ("CET1") capital ratios are higher than they otherwise would have been. The Company's CET1 capital ratios will continue to be favorably impacted by this election over the phase-in period, which ends December 31, 2024.
As of December 31, 2023 and 2022, DFS and Discover Bank met all Basel III minimum capital ratio requirements to which they were subject. DFS and Discover Bank also met the requirements to be considered "well-capitalized" under Regulation Y and prompt corrective action rules, respectively. There have been no conditions or events that management believes have changed DFS' or Discover Bank's category. To be categorized as "well-capitalized," DFS and Discover Bank must maintain minimum capital ratios outlined in the table below.
-125-

, The following table shows the actual capital amounts and ratios of DFS and Discover Bank and comparisons of each to the regulatory minimum and "well-capitalized" requirements (dollars in millions):

 	Actual		Minimum CapitalRequirements		Capital RequirementsTo Be Classified asWell-Capitalized

 	Amount		Ratio(1)		Amount		Ratio		Amount(2)		Ratio(2)

December 31, 2023

Total capital (to risk-weighted assets)

Discover Financial Services	$	17,986 			13.7 	%		$	10,471 			≥8.0%		$	13,088 			≥10.0%

Discover Bank	$	16,856 			13.0 	%		$	10,352 			≥8.0%		$	12,939 			≥10.0%

Tier 1 capital (to risk-weighted assets)

Discover Financial Services	$	15,872 			12.1 	%		$	7,853 			≥6.0%		$	7,853 			≥6.0%

Discover Bank	$	13,910 			10.8 	%		$	7,764 			≥6.0%		$	10,352 			≥8.0%

Tier 1 capital (to average assets)

Discover Financial Services	$	15,872 			10.7 	%		$	5,915 			≥4.0%		N/A		N/A

Discover Bank	$	13,910 			9.5 	%		$	5,833 			≥4.0%		$	7,292 			≥5.0%

Common Equity Tier 1 (to risk-weighted assets)

Discover Financial Services	$	14,816 			11.3 	%		$	5,890 			≥4.5%		N/A		N/A

Discover Bank	$	13,910 			10.8 	%		$	5,823 			≥4.5%		$	8,411 			≥6.5%

December 31, 2022

Total capital (to risk-weighted assets)

Discover Financial Services(3)	$	18,004 			15.8 	%		$	9,139 			≥8.0%		$	11,424 			≥10.0%

Discover Bank(3)	$	16,344 			14.5 	%		$	9,024 			≥8.0%		$	11,280 			≥10.0%

Tier 1 capital (to risk-weighted assets)

Discover Financial Services(3)	$	16,039 			14.0 	%		$	6,854 			≥6.0%		$	6,854 			≥6.0%

Discover Bank(3)	$	13,446 			11.9 	%		$	6,768 			≥6.0%		$	9,024 			≥8.0%

Tier 1 capital (to average assets)

Discover Financial Services(3)	$	16,039 			12.5 	%		$	5,147 			≥4.0%		N/A		N/A

Discover Bank(3)	$	13,446 			10.6 	%		$	5,086 			≥4.0%		$	6,357 			≥5.0%

Common Equity Tier 1 (to risk-weighted assets)

Discover Financial Services(3)	$	14,983 			13.1 	%		$	5,141 			≥4.5%		N/A		N/A

Discover Bank(3)	$	13,446 			11.9 	%		$	5,076 			≥4.5%		$	7,332 			≥6.5%

(1)Capital ratios are calculated based on the Basel III standardized approach rules, subject to applicable transition provisions, including CECL transition provisions.
(2)The Basel III rules do not establish well-capitalized thresholds for these measures for bank holding companies. Existing well-capitalized thresholds established in the Federal Reserve's Regulation Y have been included where available.
(3)Capital amounts and ratios have been updated to reflect the impact of the restatement described in Note 26: Immaterial Restatement of Prior Period Financial Statements. Discover Bank capital amounts and ratios presented as of December 31, 2022 have been updated from amounts previously disclosed in the Company's Form 10-Q for the period ended September 30, 2023, due to certain intercompany allocations recorded in the fourth quarter.
The amount of dividends that a bank may pay in any year is subject to certain regulatory restrictions. Under the current banking regulations, a bank may not pay dividends if such a payment would leave the bank inadequately capitalized. Discover Bank paid dividends of $1.7 billion, $4.0 billion and $3.3 billion in the years ended December 31, 2023, 2022 and 2021, respectively, to DFS.
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Question: How does Discover’s CET1  compare to regulatory minimums?

DFS: With a CET1 ratio of 11.3%, DFS comfortably exceeds the regulatory minimum requirement of 4.5%. Indicating that it is well-positioned to absorb potential losses while maintaining financial stability.
Discover Bank: Discover Bank's CET1 ratio of 10.8% is above the regulatory minimum requirement of 4.5% and also exceeds the well-capitalized threshold of 6.5%. This reflects strong capital adequacy and a solid cushion above the required levels, which supports its ability to manage risks and comply with regulatory standards.

Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 125:
16.    Earnings Per Share

The following table presents the calculation of basic and diluted EPS (dollars and shares in millions, except per share amounts):

 	For the Years Ended December 31,

 	2023		2022		2021

Numerator

Net income	$	2,940 			$	4,374 			$	5,422

Preferred stock dividends	(62)			(62)			(69)

Net income available to common stockholders	2,878 			4,312 			5,353

Income allocated to participating securities	(19)			(26)			(30)

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Denominator

Weighted-average shares of common stock outstanding	254 			277 			300

Effect of dilutive common stock equivalents	- 			1 			-

Weighted-average shares of common stock outstanding and common stock equivalents	254 			278 			300

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

Anti-dilutive securities were not material and had no impact on the computation of diluted EPS for the years ended December 31, 2023, 2022 and 2021.

17.    Capital Adequacy

DFS is subject to the capital adequacy guidelines of the Federal Reserve. Discover Bank, the Company's banking subsidiary, is subject to various regulatory capital requirements as administered by the FDIC. Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could limit the Company's business activities and have a direct material effect on the financial condition and operating results of DFS and Discover Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, DFS and Discover Bank must meet specific risk-based capital requirements and leverage ratios that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory guidelines. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
DFS and Discover Bank are subject to regulatory and capital rules issued by the Federal Reserve and FDIC, respectively, under the Basel Committee's December 2010 framework ("Basel III rules"). Under the Basel III rules, DFS and Discover Bank are classified as "standardized approach" entities. Standardized approach entities are defined as U.S. banking organizations with consolidated total assets over $50 billion but not exceeding $250 billion and consolidated total on-balance sheet foreign exposure less than $10 billion.
In accordance with the final rule on the impact of CECL on regulatory capital, the Company has elected to phase in the impact over three years beginning in 2022. Accordingly, the Company's Common Equity Tier 1 ("CET1") capital ratios are higher than they otherwise would have been. The Company's CET1 capital ratios will continue to be favorably impacted by this election over the phase-in period, which ends December 31, 2024.
As of December 31, 2023 and 2022, DFS and Discover Bank met all Basel III minimum capital ratio requirements to which they were subject. DFS and Discover Bank also met the requirements to be considered "well-capitalized" under Regulation Y and prompt corrective action rules, respectively. There have been no conditions or events that management believes have changed DFS' or Discover Bank's category. To be categorized as "well-capitalized," DFS and Discover Bank must maintain minimum capital ratios outlined in the table below.
-125-

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 126: The following table shows the actual capital amounts and ratios of DFS and Discover Bank and comparisons of each to the regulatory minimum and "well-capitalized" requirements (dollars in millions):

 	Actual		Minimum CapitalRequirements		Capital RequirementsTo Be Classified asWell-Capitalized

 	Amount		Ratio(1)		Amount		Ratio		Amount(2)		Ratio(2)

December 31, 2023

Total capital (to risk-weighted assets)

Discover Financial Services	$	17,986 			13.7 	%		$	10,471 			≥8.0%		$	13,088 			≥10.0%

Discover Bank	$	16,856 			13.0 	%		$	10,352 			≥8.0%		$	12,939 			≥10.0%

Tier 1 capital (to risk-weighted assets)

Discover Financial Services	$	15,872 			12.1 	%		$	7,853 			≥6.0%		$	7,853 			≥6.0%

Discover Bank	$	13,910 			10.8 	%		$	7,764 			≥6.0%		$	10,352 			≥8.0%

Tier 1 capital (to average assets)

Discover Financial Services	$	15,872 			10.7 	%		$	5,915 			≥4.0%		N/A		N/A

Discover Bank	$	13,910 			9.5 	%		$	5,833 			≥4.0%		$	7,292 			≥5.0%

Common Equity Tier 1 (to risk-weighted assets)

Discover Financial Services	$	14,816 			11.3 	%		$	5,890 			≥4.5%		N/A		N/A

Discover Bank	$	13,910 			10.8 	%		$	5,823 			≥4.5%		$	8,411 			≥6.5%

December 31, 2022

Total capital (to risk-weighted assets)

Discover Financial Services(3)	$	18,004 			15.8 	%		$	9,139 			≥8.0%		$	11,424 			≥10.0%

Discover Bank(3)	$	16,344 			14.5 	%		$	9,024 			≥8.0%		$	11,280 			≥10.0%

Tier 1 capital (to risk-weighted assets)

Discover Financial Services(3)	$	16,039 			14.0 	%		$	6,854 			≥6.0%		$	6,854 			≥6.0%

Discover Bank(3)	$	13,446 			11.9 	%		$	6,768 			≥6.0%		$	9,024 			≥8.0%

Tier 1 capital (to average assets)

Discover Financial Services(3)	$	16,039 			12.5 	%		$	5,147 			≥4.0%		N/A		N/A

Discover Bank(3)	$	13,446 			10.6 	%		$	5,086 			≥4.0%		$	6,357 			≥5.0%

Common Equity Tier 1 (to risk-weighted assets)

Discover Financial Services(3)	$	14,983 			13.1 	%		$	5,141 			≥4.5%		N/A		N/A

Discover Bank(3)	$	13,446 			11.9 	%		$	5,076 			≥4.5%		$	7,332 			≥6.5%

(1)Capital ratios are calculated based on the Basel III standardized approach rules, subject to applicable transition provisions, including CECL transition provisions.
(2)The Basel III rules do not establish well-capitalized thresholds for these measures for bank holding companies. Existing well-capitalized thresholds established in the Federal Reserve's Regulation Y have been included where available.
(3)Capital amounts and ratios have been updated to reflect the impact of the restatement described in Note 26: Immaterial Restatement of Prior Period Financial Statements. Discover Bank capital amounts and ratios presented as of December 31, 2022 have been updated from amounts previously disclosed in the Company's Form 10-Q for the period ended September 30, 2023, due to certain intercompany allocations recorded in the fourth quarter.
The amount of dividends that a bank may pay in any year is subject to certain regulatory restrictions. Under the current banking regulations, a bank may not pay dividends if such a payment would leave the bank inadequately capitalized. Discover Bank paid dividends of $1.7 billion, $4.0 billion and $3.3 billion in the years ended December 31, 2023, 2022 and 2021, respectively, to DFS.
-126-

16.    Earnings Per Share

The following table presents the calculation of basic and diluted EPS (dollars and shares in millions, except per share amounts):

 	For the Years Ended December 31,

 	2023		2022		2021

Numerator

Net income	$	2,940 			$	4,374 			$	5,422

Preferred stock dividends	(62)			(62)			(69)

Net income available to common stockholders	2,878 			4,312 			5,353

Income allocated to participating securities	(19)			(26)			(30)

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Denominator

Weighted-average shares of common stock outstanding	254 			277 			300

Effect of dilutive common stock equivalents	- 			1 			-

Weighted-average shares of common stock outstanding and common stock equivalents	254 			278 			300

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

Anti-dilutive securities were not material and had no impact on the computation of diluted EPS for the years ended December 31, 2023, 2022 and 2021.

17.    Capital Adequacy

DFS is subject to the capital adequacy guidelines of the Federal Reserve. Discover Bank, the Company's banking subsidiary, is subject to various regulatory capital requirements as administered by the FDIC. Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could limit the Company's business activities and have a direct material effect on the financial condition and operating results of DFS and Discover Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, DFS and Discover Bank must meet specific risk-based capital requirements and leverage ratios that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory guidelines. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.
DFS and Discover Bank are subject to regulatory and capital rules issued by the Federal Reserve and FDIC, respectively, under the Basel Committee's December 2010 framework ("Basel III rules"). Under the Basel III rules, DFS and Discover Bank are classified as "standardized approach" entities. Standardized approach entities are defined as U.S. banking organizations with consolidated total assets over $50 billion but not exceeding $250 billion and consolidated total on-balance sheet foreign exposure less than $10 billion.
In accordance with the final rule on the impact of CECL on regulatory capital, the Company has elected to phase in the impact over three years beginning in 2022. Accordingly, the Company's Common Equity Tier 1 ("CET1") capital ratios are higher than they otherwise would have been. The Company's CET1 capital ratios will continue to be favorably impacted by this election over the phase-in period, which ends December 31, 2024.
As of December 31, 2023 and 2022, DFS and Discover Bank met all Basel III minimum capital ratio requirements to which they were subject. DFS and Discover Bank also met the requirements to be considered "well-capitalized" under Regulation Y and prompt corrective action rules, respectively. There have been no conditions or events that management believes have changed DFS' or Discover Bank's category. To be categorized as "well-capitalized," DFS and Discover Bank must maintain minimum capital ratios outlined in the table below.
-125-

, The following table shows the actual capital amounts and ratios of DFS and Discover Bank and comparisons of each to the regulatory minimum and "well-capitalized" requirements (dollars in millions):

 	Actual		Minimum CapitalRequirements		Capital RequirementsTo Be Classified asWell-Capitalized

 	Amount		Ratio(1)		Amount		Ratio		Amount(2)		Ratio(2)

December 31, 2023

Total capital (to risk-weighted assets)

Discover Financial Services	$	17,986 			13.7 	%		$	10,471 			≥8.0%		$	13,088 			≥10.0%

Discover Bank	$	16,856 			13.0 	%		$	10,352 			≥8.0%		$	12,939 			≥10.0%

Tier 1 capital (to risk-weighted assets)

Discover Financial Services	$	15,872 			12.1 	%		$	7,853 			≥6.0%		$	7,853 			≥6.0%

Discover Bank	$	13,910 			10.8 	%		$	7,764 			≥6.0%		$	10,352 			≥8.0%

Tier 1 capital (to average assets)

Discover Financial Services	$	15,872 			10.7 	%		$	5,915 			≥4.0%		N/A		N/A

Discover Bank	$	13,910 			9.5 	%		$	5,833 			≥4.0%		$	7,292 			≥5.0%

Common Equity Tier 1 (to risk-weighted assets)

Discover Financial Services	$	14,816 			11.3 	%		$	5,890 			≥4.5%		N/A		N/A

Discover Bank	$	13,910 			10.8 	%		$	5,823 			≥4.5%		$	8,411 			≥6.5%

December 31, 2022

Total capital (to risk-weighted assets)

Discover Financial Services(3)	$	18,004 			15.8 	%		$	9,139 			≥8.0%		$	11,424 			≥10.0%

Discover Bank(3)	$	16,344 			14.5 	%		$	9,024 			≥8.0%		$	11,280 			≥10.0%

Tier 1 capital (to risk-weighted assets)

Discover Financial Services(3)	$	16,039 			14.0 	%		$	6,854 			≥6.0%		$	6,854 			≥6.0%

Discover Bank(3)	$	13,446 			11.9 	%		$	6,768 			≥6.0%		$	9,024 			≥8.0%

Tier 1 capital (to average assets)

Discover Financial Services(3)	$	16,039 			12.5 	%		$	5,147 			≥4.0%		N/A		N/A

Discover Bank(3)	$	13,446 			10.6 	%		$	5,086 			≥4.0%		$	6,357 			≥5.0%

Common Equity Tier 1 (to risk-weighted assets)

Discover Financial Services(3)	$	14,983 			13.1 	%		$	5,141 			≥4.5%		N/A		N/A

Discover Bank(3)	$	13,446 			11.9 	%		$	5,076 			≥4.5%		$	7,332 			≥6.5%

(1)Capital ratios are calculated based on the Basel III standardized approach rules, subject to applicable transition provisions, including CECL transition provisions.
(2)The Basel III rules do not establish well-capitalized thresholds for these measures for bank holding companies. Existing well-capitalized thresholds established in the Federal Reserve's Regulation Y have been included where available.
(3)Capital amounts and ratios have been updated to reflect the impact of the restatement described in Note 26: Immaterial Restatement of Prior Period Financial Statements. Discover Bank capital amounts and ratios presented as of December 31, 2022 have been updated from amounts previously disclosed in the Company's Form 10-Q for the period ended September 30, 2023, due to certain intercompany allocations recorded in the fourth quarter.
The amount of dividends that a bank may pay in any year is subject to certain regulatory restrictions. Under the current banking regulations, a bank may not pay dividends if such a payment would leave the bank inadequately capitalized. Discover Bank paid dividends of $1.7 billion, $4.0 billion and $3.3 billion in the years ended December 31, 2023, 2022 and 2021, respectively, to DFS.
-126-


Question: What was Discover’s Return on Assets for 2023?

Return on Assets (ROA) is calculated using the following formula:

ROA = (Net Income/Average Total Assets)×100
Calculation for 2023:
Net Income (2023): $2,940 million
Total Assets (2023): $151,522 million
Total Assets (2022): $131,706 million
To find the average total assets:

Average Total Assets=(151,522+131,706)/2 = 141,614 million
ROA = (2,940/141,614)×100 = 2.08%

Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 85:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Financial Condition

(dollars in millions, except for share amounts)

	December 31,

	2023		2022

Assets

Cash and cash equivalents	$	11,685 			$	8,856

Restricted cash	43 			41

Investment securities (includes available-for-sale securities of $13,402 and $11,987 reported at fair value with associated amortized cost of $13,451 and $12,167 at December 31, 2023 and 2022, respectively)	13,655 			12,208

Loan receivables

Loan receivables	128,409 			112,120

Allowance for credit losses	(9,283)			(7,374)

Net loan receivables	119,126 			104,746

Premises and equipment, net	1,091 			1,003

Goodwill	255 			255

Other assets	5,667 			4,597

Total assets	$	151,522 			$	131,706

Liabilities and Stockholders' Equity

Liabilities

Deposits

Interest-bearing deposit accounts	$	107,493 			$	90,151

Non-interest-bearing deposit accounts	1,438 			1,485

Total deposits	108,931 			91,636

Short-term borrowings	750 			-

Long-term borrowings	20,581 			20,108

Accrued expenses and other liabilities	6,432 			5,618

Total liabilities	136,694 			117,362

Commitments, contingencies and guarantees (Notes 15, 18 and 19)

Stockholders' Equity

Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 570,837,720 and 569,689,007 shares issued at December 31, 2023 and 2022, respectively	6 			6

Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 10,700 shares issued and outstanding at December 31, 2023 and 2022, respectively	1,056 			1,056

Additional paid-in capital	4,553 			4,468

Retained earnings	30,448 			28,207

Accumulated other comprehensive loss	(225)			(339)

Treasury stock, at cost; 320,734,860 and 302,305,216 shares at December 31, 2023 and 2022, respectively	(21,010)			(19,054)

Total stockholders' equity	14,828 			14,344

Total liabilities and stockholders' equity	$	151,522 			$	131,706

The table below presents the carrying amounts of certain assets and liabilities of Discover Financial Services' consolidated variable interest entities ("VIEs"), which are included in the consolidated statements of financial condition above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services.

	December 31,

	2023		2022

Assets

Restricted cash	$	43 			$	41

Loan receivables	$	30,590 			$	25,937

Allowance for credit losses allocated to securitized loan receivables	$	(1,347)			$	(1,152)

Other assets	$	3 			$	3

Liabilities

Short- and long-term borrowings	$	11,743 			$	10,259

Accrued expenses and other liabilities	$	19 			$	14

See Notes to the Consolidated Financial Statements.

-85-

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 86:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-

DISCOVER FINANCIAL SERVICES

Consolidated Statements of Financial Condition

(dollars in millions, except for share amounts)

	December 31,

	2023		2022

Assets

Cash and cash equivalents	$	11,685 			$	8,856

Restricted cash	43 			41

Investment securities (includes available-for-sale securities of $13,402 and $11,987 reported at fair value with associated amortized cost of $13,451 and $12,167 at December 31, 2023 and 2022, respectively)	13,655 			12,208

Loan receivables

Loan receivables	128,409 			112,120

Allowance for credit losses	(9,283)			(7,374)

Net loan receivables	119,126 			104,746

Premises and equipment, net	1,091 			1,003

Goodwill	255 			255

Other assets	5,667 			4,597

Total assets	$	151,522 			$	131,706

Liabilities and Stockholders' Equity

Liabilities

Deposits

Interest-bearing deposit accounts	$	107,493 			$	90,151

Non-interest-bearing deposit accounts	1,438 			1,485

Total deposits	108,931 			91,636

Short-term borrowings	750 			-

Long-term borrowings	20,581 			20,108

Accrued expenses and other liabilities	6,432 			5,618

Total liabilities	136,694 			117,362

Commitments, contingencies and guarantees (Notes 15, 18 and 19)

Stockholders' Equity

Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 570,837,720 and 569,689,007 shares issued at December 31, 2023 and 2022, respectively	6 			6

Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 10,700 shares issued and outstanding at December 31, 2023 and 2022, respectively	1,056 			1,056

Additional paid-in capital	4,553 			4,468

Retained earnings	30,448 			28,207

Accumulated other comprehensive loss	(225)			(339)

Treasury stock, at cost; 320,734,860 and 302,305,216 shares at December 31, 2023 and 2022, respectively	(21,010)			(19,054)

Total stockholders' equity	14,828 			14,344

Total liabilities and stockholders' equity	$	151,522 			$	131,706

The table below presents the carrying amounts of certain assets and liabilities of Discover Financial Services' consolidated variable interest entities ("VIEs"), which are included in the consolidated statements of financial condition above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services.

	December 31,

	2023		2022

Assets

Restricted cash	$	43 			$	41

Loan receivables	$	30,590 			$	25,937

Allowance for credit losses allocated to securitized loan receivables	$	(1,347)			$	(1,152)

Other assets	$	3 			$	3

Liabilities

Short- and long-term borrowings	$	11,743 			$	10,259

Accrued expenses and other liabilities	$	19 			$	14

See Notes to the Consolidated Financial Statements.

-85-

,
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-


Question: What is Discover’s Provision Coverage Ratio for 2023?

The Provision Coverage Ratio (PCR) for Discover Financial Services is calculated by dividing total provisions by gross non-performing assets (NPAs) and multiplying by 100. In this case, Discover’s total provisions amount to $9,283 million, while its total NPAs are $2,314 million (defined as loans which are 90 days or more delinquent).
Thus,  401.21%

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 64:
Loan Quality

Loan receivables consist of the following (dollars in millions):|    |                             |              |         |      |         |    |         |
|---:|:----------------------------|:-------------|:--------|:-----|:--------|:---|:--------|
|  1 |                             | December 31, |         |      |         |    |         |
|  2 |                             | 2023         |         | 2022 |         |    |         |
|  3 | Credit card loans           | $            | 102,259 |      |         | $  | 90,113  |
|  4 | Other loans                 |              |         |      |         |    |         |
|  5 | Private student loans       | 10,352       |         |      | 10,308  |    |         |
|  6 | Personal loans              | 9,852        |         |      | 7,998   |    |         |
|  7 | Other loans                 | 5,946        |         |      | 3,701   |    |         |
|  8 | Total other loans           | 26,150       |         |      | 22,007  |    |         |
|  9 | Total loan receivables      | 128,409      |         |      | 112,120 |    |         |
| 10 | Allowance for credit losses | (9,283)      |         |      | (7,374) |    |         |
| 11 | Net loan receivables        | $            | 119,126 |      |         | $  | 104,746 |

Provision and Allowance for Credit Losses

Provision for credit losses is the expense related to maintaining the allowance for credit losses at an appropriate level to absorb the estimate of credit losses anticipated over the remaining expected life of loan receivables at each period end date. In deriving the estimate of expected credit losses, we consider the collectability of principal, interest and fees associated with our loan receivables. We also consider expected recoveries of amounts that were either previously charged-off or are expected to be charged-off. Establishing the estimate for expected credit losses requires significant management judgment. The factors that influence the provision for credit losses include:
•Increases or decreases in outstanding loan balances, including:
•Changes in consumer spending, payment and credit utilization behaviors;
•The level of new account and loan originations and loan maturities; and
•Changes in the overall mix of accounts and products within the portfolio;
•The credit quality of the loan portfolio, which reflects our credit granting practices and the effectiveness of collection efforts, among other factors;
•The impact of general economic conditions on the consumer, including national and regional conditions, unemployment levels, bankruptcy trends and interest rate movements;
•The level and direction of historical losses; and
•Regulatory changes or new regulatory guidance.

Refer to "- Critical Accounting Estimates - Allowance for Credit Losses" and Note 4: Loan Receivables to our consolidated financial statements for more details on how we estimate the allowance for credit losses.

-64-

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 67:
Delinquencies

Delinquencies are an indicator of credit quality at a point in time. A loan balance is considered delinquent when contractual payments on the loan become 30 days past due.
The following table presents the amounts and delinquency rates of key loan products that are 30 and 90 days or more delinquent, and loan receivables that are not accruing interest regardless of delinquency (dollars in millions):|    |                                  |              |       |      |      |    |    |    |       |      |    |
|---:|:---------------------------------|:-------------|:------|:-----|:-----|:---|:---|:---|:------|:-----|:---|
|  1 |                                  | December 31, |       |      |      |    |    |    |       |      |    |
|  2 |                                  | 2023         |       | 2022 |      |    |    |    |       |      |    |
|  3 |                                  | $            |       | %    | $    |    | %  |    |       |      |    |
|  4 | Loans 30 or more days delinquent |              |       |      |      |    |    |    |       |      |    |
|  5 | Credit card loans                | $            | 3,955 |      | 3.87 | %  |    | $  | 2,278 | 2.53 | %  |
|  6 | Private student loans            | $            | 271   |      | 2.62 | %  |    | $  | 212   | 2.05 | %  |
|  7 | Personal loans                   | $            | 143   |      | 1.45 | %  |    | $  | 63    | 0.80 | %  |
|  9 | Total loan receivables           | $            | 4,427 |      | 3.45 | %  |    | $  | 2,578 | 2.30 | %  |
| 11 | Loans 90 or more days delinquent |              |       |      |      |    |    |    |       |      |    |
| 12 | Credit card loans                | $            | 1,917 |      | 1.87 | %  |    | $  | 1,028 | 1.14 | %  |
| 13 | Private student loans            | $            | 70    |      | 0.67 | %  |    | $  | 45    | 0.43 | %  |
| 14 | Personal loans                   | $            | 39    |      | 0.40 | %  |    | $  | 16    | 0.21 | %  |
| 16 | Total loan receivables           | $            | 2,045 |      | 1.59 | %  |    | $  | 1,101 | 0.98 | %  |
| 18 | Loans not accruing interest      | $            | 269   |      | 0.21 | %  |    | $  | 214   | 0.19 | %  |
The 30-day and 90-day delinquency rates for credit card loans, private student loans, and personal loans at December 31, 2023, increased compared to December 31, 2022, primarily driven by portfolio seasoning.

Modified and Restructured Loans

For information regarding modified and restructured loans, see Note 4: Loan Receivables to our condensed consolidated financial statements.

Maturities and Sensitivities of Loan Receivables to Changes in Interest Rates

Our loan portfolio had the following maturity distribution(1) (dollars in millions):
|    |                       |                    |        |                                    |       |                                           |        |                         |       |        |        |       |    |         |
|---:|:----------------------|:-------------------|:-------|:-----------------------------------|:------|:------------------------------------------|:-------|:------------------------|:------|:-------|:-------|:------|:---|:--------|
|  1 | At December 31, 2023  | Due OneYear orLess |        | Due AfterOne YearThroughFive Years |       | Due AfterFive Years Through Fifteen Years |        | Due After Fifteen Years | Total |        |        |       |    |         |
|  2 | Credit card loans     | $                  | 32,250 |                                    |       | $                                         | 54,628 |                         | $     | 15,032 | $      | 349   | $  | 102,259 |
|  3 | Private student loans | 364                |        |                                    | 2,083 |                                           |        | 6,296                   |       | 1,609  | 10,352 |       |    |         |
|  4 | Personal loans        | 2,653              |        |                                    | 6,653 |                                           |        | 546                     |       | -      | 9,852  |       |    |         |
|  5 | Other loans           | 161                |        |                                    | 724   |                                           |        | 2,102                   |       | 2,959  | 5,946  |       |    |         |
|  6 | Total loan portfolio  | $                  | 35,428 |                                    |       | $                                         | 64,088 |                         | $     | 23,976 | $      | 4,917 | $  | 128,409 |

(1)    Because of the uncertainty regarding loan repayment patterns, the above amounts have been calculated using contractually required minimum payments. Historically, actual loan repayments have been higher than such minimum payments and, therefore, the above amounts may not necessarily be indicative of our actual loan repayments.
At December 31, 2023, approximately $55.9 billion of our loan portfolio due after one year had interest rates tied to an index and approximately $37.0 billion were fixed-rate loans.
-67-

Loan Quality

Loan receivables consist of the following (dollars in millions):|    |                             |              |         |      |         |    |         |
|---:|:----------------------------|:-------------|:--------|:-----|:--------|:---|:--------|
|  1 |                             | December 31, |         |      |         |    |         |
|  2 |                             | 2023         |         | 2022 |         |    |         |
|  3 | Credit card loans           | $            | 102,259 |      |         | $  | 90,113  |
|  4 | Other loans                 |              |         |      |         |    |         |
|  5 | Private student loans       | 10,352       |         |      | 10,308  |    |         |
|  6 | Personal loans              | 9,852        |         |      | 7,998   |    |         |
|  7 | Other loans                 | 5,946        |         |      | 3,701   |    |         |
|  8 | Total other loans           | 26,150       |         |      | 22,007  |    |         |
|  9 | Total loan receivables      | 128,409      |         |      | 112,120 |    |         |
| 10 | Allowance for credit losses | (9,283)      |         |      | (7,374) |    |         |
| 11 | Net loan receivables        | $            | 119,126 |      |         | $  | 104,746 |

Provision and Allowance for Credit Losses

Provision for credit losses is the expense related to maintaining the allowance for credit losses at an appropriate level to absorb the estimate of credit losses anticipated over the remaining expected life of loan receivables at each period end date. In deriving the estimate of expected credit losses, we consider the collectability of principal, interest and fees associated with our loan receivables. We also consider expected recoveries of amounts that were either previously charged-off or are expected to be charged-off. Establishing the estimate for expected credit losses requires significant management judgment. The factors that influence the provision for credit losses include:
•Increases or decreases in outstanding loan balances, including:
•Changes in consumer spending, payment and credit utilization behaviors;
•The level of new account and loan originations and loan maturities; and
•Changes in the overall mix of accounts and products within the portfolio;
•The credit quality of the loan portfolio, which reflects our credit granting practices and the effectiveness of collection efforts, among other factors;
•The impact of general economic conditions on the consumer, including national and regional conditions, unemployment levels, bankruptcy trends and interest rate movements;
•The level and direction of historical losses; and
•Regulatory changes or new regulatory guidance.

Refer to "- Critical Accounting Estimates - Allowance for Credit Losses" and Note 4: Loan Receivables to our consolidated financial statements for more details on how we estimate the allowance for credit losses.

-64-

,
Delinquencies

Delinquencies are an indicator of credit quality at a point in time. A loan balance is considered delinquent when contractual payments on the loan become 30 days past due.
The following table presents the amounts and delinquency rates of key loan products that are 30 and 90 days or more delinquent, and loan receivables that are not accruing interest regardless of delinquency (dollars in millions):|    |                                  |              |       |      |      |    |    |    |       |      |    |
|---:|:---------------------------------|:-------------|:------|:-----|:-----|:---|:---|:---|:------|:-----|:---|
|  1 |                                  | December 31, |       |      |      |    |    |    |       |      |    |
|  2 |                                  | 2023         |       | 2022 |      |    |    |    |       |      |    |
|  3 |                                  | $            |       | %    | $    |    | %  |    |       |      |    |
|  4 | Loans 30 or more days delinquent |              |       |      |      |    |    |    |       |      |    |
|  5 | Credit card loans                | $            | 3,955 |      | 3.87 | %  |    | $  | 2,278 | 2.53 | %  |
|  6 | Private student loans            | $            | 271   |      | 2.62 | %  |    | $  | 212   | 2.05 | %  |
|  7 | Personal loans                   | $            | 143   |      | 1.45 | %  |    | $  | 63    | 0.80 | %  |
|  9 | Total loan receivables           | $            | 4,427 |      | 3.45 | %  |    | $  | 2,578 | 2.30 | %  |
| 11 | Loans 90 or more days delinquent |              |       |      |      |    |    |    |       |      |    |
| 12 | Credit card loans                | $            | 1,917 |      | 1.87 | %  |    | $  | 1,028 | 1.14 | %  |
| 13 | Private student loans            | $            | 70    |      | 0.67 | %  |    | $  | 45    | 0.43 | %  |
| 14 | Personal loans                   | $            | 39    |      | 0.40 | %  |    | $  | 16    | 0.21 | %  |
| 16 | Total loan receivables           | $            | 2,045 |      | 1.59 | %  |    | $  | 1,101 | 0.98 | %  |
| 18 | Loans not accruing interest      | $            | 269   |      | 0.21 | %  |    | $  | 214   | 0.19 | %  |
The 30-day and 90-day delinquency rates for credit card loans, private student loans, and personal loans at December 31, 2023, increased compared to December 31, 2022, primarily driven by portfolio seasoning.

Modified and Restructured Loans

For information regarding modified and restructured loans, see Note 4: Loan Receivables to our condensed consolidated financial statements.

Maturities and Sensitivities of Loan Receivables to Changes in Interest Rates

Our loan portfolio had the following maturity distribution(1) (dollars in millions):
|    |                       |                    |        |                                    |       |                                           |        |                         |       |        |        |       |    |         |
|---:|:----------------------|:-------------------|:-------|:-----------------------------------|:------|:------------------------------------------|:-------|:------------------------|:------|:-------|:-------|:------|:---|:--------|
|  1 | At December 31, 2023  | Due OneYear orLess |        | Due AfterOne YearThroughFive Years |       | Due AfterFive Years Through Fifteen Years |        | Due After Fifteen Years | Total |        |        |       |    |         |
|  2 | Credit card loans     | $                  | 32,250 |                                    |       | $                                         | 54,628 |                         | $     | 15,032 | $      | 349   | $  | 102,259 |
|  3 | Private student loans | 364                |        |                                    | 2,083 |                                           |        | 6,296                   |       | 1,609  | 10,352 |       |    |         |
|  4 | Personal loans        | 2,653              |        |                                    | 6,653 |                                           |        | 546                     |       | -      | 9,852  |       |    |         |
|  5 | Other loans           | 161                |        |                                    | 724   |                                           |        | 2,102                   |       | 2,959  | 5,946  |       |    |         |
|  6 | Total loan portfolio  | $                  | 35,428 |                                    |       | $                                         | 64,088 |                         | $     | 23,976 | $      | 4,917 | $  | 128,409 |

(1)    Because of the uncertainty regarding loan repayment patterns, the above amounts have been calculated using contractually required minimum payments. Historically, actual loan repayments have been higher than such minimum payments and, therefore, the above amounts may not necessarily be indicative of our actual loan repayments.
At December 31, 2023, approximately $55.9 billion of our loan portfolio due after one year had interest rates tied to an index and approximately $37.0 billion were fixed-rate loans.
-67-

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 64:
Loan Quality

Loan receivables consist of the following (dollars in millions):

	December 31,

	2023		2022

Credit card loans	$	102,259 			$	90,113

Other loans

Private student loans	10,352 			10,308

Personal loans	9,852 			7,998

Other loans	5,946 			3,701

Total other loans	26,150 			22,007

Total loan receivables	128,409 			112,120

Allowance for credit losses	(9,283)			(7,374)

Net loan receivables	$	119,126 			$	104,746

Provision and Allowance for Credit Losses

Provision for credit losses is the expense related to maintaining the allowance for credit losses at an appropriate level to absorb the estimate of credit losses anticipated over the remaining expected life of loan receivables at each period end date. In deriving the estimate of expected credit losses, we consider the collectability of principal, interest and fees associated with our loan receivables. We also consider expected recoveries of amounts that were either previously charged-off or are expected to be charged-off. Establishing the estimate for expected credit losses requires significant management judgment. The factors that influence the provision for credit losses include:
•Increases or decreases in outstanding loan balances, including:
•Changes in consumer spending, payment and credit utilization behaviors;
•The level of new account and loan originations and loan maturities; and
•Changes in the overall mix of accounts and products within the portfolio;
•The credit quality of the loan portfolio, which reflects our credit granting practices and the effectiveness of collection efforts, among other factors;
•The impact of general economic conditions on the consumer, including national and regional conditions, unemployment levels, bankruptcy trends and interest rate movements;
•The level and direction of historical losses; and
•Regulatory changes or new regulatory guidance.

Refer to "- Critical Accounting Estimates - Allowance for Credit Losses" and Note 4: Loan Receivables to our consolidated financial statements for more details on how we estimate the allowance for credit losses.

-64-

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 67:
Delinquencies

Delinquencies are an indicator of credit quality at a point in time. A loan balance is considered delinquent when contractual payments on the loan become 30 days past due.
The following table presents the amounts and delinquency rates of key loan products that are 30 and 90 days or more delinquent, and loan receivables that are not accruing interest regardless of delinquency (dollars in millions):

	December 31,

 	2023		2022

 	$		%		$		%

Loans 30 or more days delinquent

Credit card loans	$	3,955 			3.87 	%		$	2,278 			2.53 	%

Private student loans	$	271 			2.62 	%		$	212 			2.05 	%

Personal loans	$	143 			1.45 	%		$	63 			0.80 	%

Total loan receivables	$	4,427 			3.45 	%		$	2,578 			2.30 	%

Loans 90 or more days delinquent

Credit card loans	$	1,917 			1.87 	%		$	1,028 			1.14 	%

Private student loans	$	70 			0.67 	%		$	45 			0.43 	%

Personal loans	$	39 			0.40 	%		$	16 			0.21 	%

Total loan receivables	$	2,045 			1.59 	%		$	1,101 			0.98 	%

Loans not accruing interest	$	269 			0.21 	%		$	214 			0.19 	%

The 30-day and 90-day delinquency rates for credit card loans, private student loans, and personal loans at December 31, 2023, increased compared to December 31, 2022, primarily driven by portfolio seasoning.

Modified and Restructured Loans

For information regarding modified and restructured loans, see Note 4: Loan Receivables to our condensed consolidated financial statements.

Maturities and Sensitivities of Loan Receivables to Changes in Interest Rates

Our loan portfolio had the following maturity distribution(1) (dollars in millions):

At December 31, 2023	Due OneYear orLess		Due AfterOne YearThroughFive Years		Due AfterFive Years Through Fifteen Years		Due After Fifteen Years		Total

Credit card loans	$	32,250 			$	54,628 			$	15,032 			$	349 			$	102,259

Private student loans	364 			2,083 			6,296 			1,609 			10,352

Personal loans	2,653 			6,653 			546 			- 			9,852

Other loans	161 			724 			2,102 			2,959 			5,946

Total loan portfolio	$	35,428 			$	64,088 			$	23,976 			$	4,917 			$	128,409

(1)    Because of the uncertainty regarding loan repayment patterns, the above amounts have been calculated using contractually required minimum payments. Historically, actual loan repayments have been higher than such minimum payments and, therefore, the above amounts may not necessarily be indicative of our actual loan repayments.
At December 31, 2023, approximately $55.9 billion of our loan portfolio due after one year had interest rates tied to an index and approximately $37.0 billion were fixed-rate loans.
-67-

Loan Quality

Loan receivables consist of the following (dollars in millions):

	December 31,

	2023		2022

Credit card loans	$	102,259 			$	90,113

Other loans

Private student loans	10,352 			10,308

Personal loans	9,852 			7,998

Other loans	5,946 			3,701

Total other loans	26,150 			22,007

Total loan receivables	128,409 			112,120

Allowance for credit losses	(9,283)			(7,374)

Net loan receivables	$	119,126 			$	104,746

Provision and Allowance for Credit Losses

Provision for credit losses is the expense related to maintaining the allowance for credit losses at an appropriate level to absorb the estimate of credit losses anticipated over the remaining expected life of loan receivables at each period end date. In deriving the estimate of expected credit losses, we consider the collectability of principal, interest and fees associated with our loan receivables. We also consider expected recoveries of amounts that were either previously charged-off or are expected to be charged-off. Establishing the estimate for expected credit losses requires significant management judgment. The factors that influence the provision for credit losses include:
•Increases or decreases in outstanding loan balances, including:
•Changes in consumer spending, payment and credit utilization behaviors;
•The level of new account and loan originations and loan maturities; and
•Changes in the overall mix of accounts and products within the portfolio;
•The credit quality of the loan portfolio, which reflects our credit granting practices and the effectiveness of collection efforts, among other factors;
•The impact of general economic conditions on the consumer, including national and regional conditions, unemployment levels, bankruptcy trends and interest rate movements;
•The level and direction of historical losses; and
•Regulatory changes or new regulatory guidance.

Refer to "- Critical Accounting Estimates - Allowance for Credit Losses" and Note 4: Loan Receivables to our consolidated financial statements for more details on how we estimate the allowance for credit losses.

-64-

,
Delinquencies

Delinquencies are an indicator of credit quality at a point in time. A loan balance is considered delinquent when contractual payments on the loan become 30 days past due.
The following table presents the amounts and delinquency rates of key loan products that are 30 and 90 days or more delinquent, and loan receivables that are not accruing interest regardless of delinquency (dollars in millions):

	December 31,

 	2023		2022

 	$		%		$		%

Loans 30 or more days delinquent

Credit card loans	$	3,955 			3.87 	%		$	2,278 			2.53 	%

Private student loans	$	271 			2.62 	%		$	212 			2.05 	%

Personal loans	$	143 			1.45 	%		$	63 			0.80 	%

Total loan receivables	$	4,427 			3.45 	%		$	2,578 			2.30 	%

Loans 90 or more days delinquent

Credit card loans	$	1,917 			1.87 	%		$	1,028 			1.14 	%

Private student loans	$	70 			0.67 	%		$	45 			0.43 	%

Personal loans	$	39 			0.40 	%		$	16 			0.21 	%

Total loan receivables	$	2,045 			1.59 	%		$	1,101 			0.98 	%

Loans not accruing interest	$	269 			0.21 	%		$	214 			0.19 	%

The 30-day and 90-day delinquency rates for credit card loans, private student loans, and personal loans at December 31, 2023, increased compared to December 31, 2022, primarily driven by portfolio seasoning.

Modified and Restructured Loans

For information regarding modified and restructured loans, see Note 4: Loan Receivables to our condensed consolidated financial statements.

Maturities and Sensitivities of Loan Receivables to Changes in Interest Rates

Our loan portfolio had the following maturity distribution(1) (dollars in millions):

At December 31, 2023	Due OneYear orLess		Due AfterOne YearThroughFive Years		Due AfterFive Years Through Fifteen Years		Due After Fifteen Years		Total

Credit card loans	$	32,250 			$	54,628 			$	15,032 			$	349 			$	102,259

Private student loans	364 			2,083 			6,296 			1,609 			10,352

Personal loans	2,653 			6,653 			546 			- 			9,852

Other loans	161 			724 			2,102 			2,959 			5,946

Total loan portfolio	$	35,428 			$	64,088 			$	23,976 			$	4,917 			$	128,409

(1)    Because of the uncertainty regarding loan repayment patterns, the above amounts have been calculated using contractually required minimum payments. Historically, actual loan repayments have been higher than such minimum payments and, therefore, the above amounts may not necessarily be indicative of our actual loan repayments.
At December 31, 2023, approximately $55.9 billion of our loan portfolio due after one year had interest rates tied to an index and approximately $37.0 billion were fixed-rate loans.
-67-


Question: What is Discover’s Charge-Off Ratio compare to previous years?

The Charge-Off Ratio indicates the percentage of a company's loan receivables that have been written off as uncollectible over a specific period. It is a measure of credit risk and the effectiveness of a company’s credit management practices. It is calculated as the ratio of Net Charge-off to Average Loan Receivables.
The trends of the Charge of Ratio of Discover Financial Services is as follows:

Net Charge-Offs:
2023: $4,042 million
2022: $1,817 million
2021: $1,631 million

Average Loan Receivables:
2023: $118,311 million
2022: $99,673 million
2021: $88,421 million

Charge off Ratio:
2023: 3.41%
2022: 1.82%
2021: 1.84%

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations


Question: What does the change in Discover’s Charge-Off Ratio compare to previous years imply?

In 2023, Discover Financial Services’ Charge-Off Ratio increased to approximately 3.41%, up from 1.82% in 2022 and 1.84% in 2021. This significant increase indicates a notable rise in the proportion of loan receivables deemed uncollectible. The rise in the Charge-Off Ratio reflects a deterioration in the company’s credit quality over the past year, suggesting that a larger percentage of its loan portfolio is facing defaults or delinquencies.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations


Question: What is capital-to-total asset ratio of Discover Financial Services for years 2023 and 2022?

Total Capital Ratio measures the proportion of a company's total capital relative to its total assets. It provides insight into how much of the company's assets are financed through its capital base, including both debt and equity.

Calculation:
Total Capital = Total Debt + Shareholders' Equity

For 2023:
Total Debt: $750 million (Short-Term Borrowings) + $20,581 million (Long-Term Borrowings) = $21,331 million
Shareholders' Equity: $14,828 million
Total Capital: $21,331 million + $14,828 million = $36,159 million
Total Assets: $151,522 million
Total Capital Ratio: 36,159/151,522 = 23.8%
For 2022:

Total Debt: $0 (Short-Term Borrowings) + $20,108 million (Long-Term Borrowings) = $20,108 million
Shareholders' Equity: $14,344 million
Total Capital: $20,108 million + $14,344 million = $34,452 million
Total Assets: $131,706 million
Total Capital Ratio: 34,452/131,706= 26.1%
Summary:
2023 Total Capital Ratio: 23.8%
2022 Total Capital Ratio: 26.1%
Analysis:
The Total Capital Ratio decreased from 26.1% in 2022 to 23.8% in 2023. This decline suggests that Discover Financial Services has become slightly more reliant on debt relative to its equity as its asset base has grown. The increase in total assets outpaced the growth in total capital, indicating a shift in the capital structure. This change may reflect adjustments in the company’s financing strategy or operational expansion, potentially impacting its financial stability and risk profile.

Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 85:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Financial Condition

(dollars in millions, except for share amounts)

	December 31,

	2023		2022

Assets

Cash and cash equivalents	$	11,685 			$	8,856

Restricted cash	43 			41

Investment securities (includes available-for-sale securities of $13,402 and $11,987 reported at fair value with associated amortized cost of $13,451 and $12,167 at December 31, 2023 and 2022, respectively)	13,655 			12,208

Loan receivables

Loan receivables	128,409 			112,120

Allowance for credit losses	(9,283)			(7,374)

Net loan receivables	119,126 			104,746

Premises and equipment, net	1,091 			1,003

Goodwill	255 			255

Other assets	5,667 			4,597

Total assets	$	151,522 			$	131,706

Liabilities and Stockholders' Equity

Liabilities

Deposits

Interest-bearing deposit accounts	$	107,493 			$	90,151

Non-interest-bearing deposit accounts	1,438 			1,485

Total deposits	108,931 			91,636

Short-term borrowings	750 			-

Long-term borrowings	20,581 			20,108

Accrued expenses and other liabilities	6,432 			5,618

Total liabilities	136,694 			117,362

Commitments, contingencies and guarantees (Notes 15, 18 and 19)

Stockholders' Equity

Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 570,837,720 and 569,689,007 shares issued at December 31, 2023 and 2022, respectively	6 			6

Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 10,700 shares issued and outstanding at December 31, 2023 and 2022, respectively	1,056 			1,056

Additional paid-in capital	4,553 			4,468

Retained earnings	30,448 			28,207

Accumulated other comprehensive loss	(225)			(339)

Treasury stock, at cost; 320,734,860 and 302,305,216 shares at December 31, 2023 and 2022, respectively	(21,010)			(19,054)

Total stockholders' equity	14,828 			14,344

Total liabilities and stockholders' equity	$	151,522 			$	131,706

The table below presents the carrying amounts of certain assets and liabilities of Discover Financial Services' consolidated variable interest entities ("VIEs"), which are included in the consolidated statements of financial condition above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services.

	December 31,

	2023		2022

Assets

Restricted cash	$	43 			$	41

Loan receivables	$	30,590 			$	25,937

Allowance for credit losses allocated to securitized loan receivables	$	(1,347)			$	(1,152)

Other assets	$	3 			$	3

Liabilities

Short- and long-term borrowings	$	11,743 			$	10,259

Accrued expenses and other liabilities	$	19 			$	14

See Notes to the Consolidated Financial Statements.

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Question: How did Discover Financial Service’s Gross Profit Margin for 2023 compare to the previous year?

Discover Financial Services: Gross Profit Margin Analysis
Gross Profit Margin Calculation for 2023
Gross Profit=Net Interest Income+Other Income−Provision for Credit Losses Gross Profit=$13,099 million+$2,761 million−$6,018 million=$9,842 million
Total Revenue=Net Interest Income+Other Income Total Revenue=$13,099 million+$2,761 million=$15,860 million
Gross Profit Margin=Gross Profit/Total Revenue×100
Gross Profit Margin=9,842/15,860×100 = 62.1%

Gross Profit Margin for 2022:
Gross Profit=$10,999 million+$2,294 million−$2,359 million=$10,934 million
Total Revenue=$10,999 million+$2,294 million=$13,293 million
Gross Profit Margin=10,934/13,293×100 = 82.2%

Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 86:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

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Question: What is DFS Debt-to-Equity Ratio for 2023?

Debt-to-Equity Ratio Calculation for 2023:
Total Liabilities (2023): $136,694 m illion
Total Stockholders' Equity (2023):$14,828 million
Debt-to-Equity Ratio=Total Liabilities/Total Stockholders’ Equity = 136,694/14,828 = 9.2

Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 85:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Financial Condition

(dollars in millions, except for share amounts)

	December 31,

	2023		2022

Assets

Cash and cash equivalents	$	11,685 			$	8,856

Restricted cash	43 			41

Investment securities (includes available-for-sale securities of $13,402 and $11,987 reported at fair value with associated amortized cost of $13,451 and $12,167 at December 31, 2023 and 2022, respectively)	13,655 			12,208

Loan receivables

Loan receivables	128,409 			112,120

Allowance for credit losses	(9,283)			(7,374)

Net loan receivables	119,126 			104,746

Premises and equipment, net	1,091 			1,003

Goodwill	255 			255

Other assets	5,667 			4,597

Total assets	$	151,522 			$	131,706

Liabilities and Stockholders' Equity

Liabilities

Deposits

Interest-bearing deposit accounts	$	107,493 			$	90,151

Non-interest-bearing deposit accounts	1,438 			1,485

Total deposits	108,931 			91,636

Short-term borrowings	750 			-

Long-term borrowings	20,581 			20,108

Accrued expenses and other liabilities	6,432 			5,618

Total liabilities	136,694 			117,362

Commitments, contingencies and guarantees (Notes 15, 18 and 19)

Stockholders' Equity

Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 570,837,720 and 569,689,007 shares issued at December 31, 2023 and 2022, respectively	6 			6

Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 10,700 shares issued and outstanding at December 31, 2023 and 2022, respectively	1,056 			1,056

Additional paid-in capital	4,553 			4,468

Retained earnings	30,448 			28,207

Accumulated other comprehensive loss	(225)			(339)

Treasury stock, at cost; 320,734,860 and 302,305,216 shares at December 31, 2023 and 2022, respectively	(21,010)			(19,054)

Total stockholders' equity	14,828 			14,344

Total liabilities and stockholders' equity	$	151,522 			$	131,706

The table below presents the carrying amounts of certain assets and liabilities of Discover Financial Services' consolidated variable interest entities ("VIEs"), which are included in the consolidated statements of financial condition above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services.

	December 31,

	2023		2022

Assets

Restricted cash	$	43 			$	41

Loan receivables	$	30,590 			$	25,937

Allowance for credit losses allocated to securitized loan receivables	$	(1,347)			$	(1,152)

Other assets	$	3 			$	3

Liabilities

Short- and long-term borrowings	$	11,743 			$	10,259

Accrued expenses and other liabilities	$	19 			$	14

See Notes to the Consolidated Financial Statements.

-85-


Question: What was Discover’s ROE for 2023 compared to 2022?

Discover Financial Services: Return on Equity (ROE) for 2023 vs. 2022
ROE Calculation: Formula: ROE=Net Income allocated to Common Shareholders/Average Shareholders’ Equity
Net Income allocated to common shareholders:
2023: $2,859 million
2022: $4,286 million
Average Shareholders’ Equity=(Equity (2023)+Equity (2022))/2=($14,828 million+$14,344 million)/2=$14,586 million
ROE Calculation:
2023: ROE (2023)=$2,859 million/$14,586 million = 19.6%
2022: ROE (2022)=$4,286 million/$14,344 million = 29.9%

Item 8.    Financial Statements and Supplementary Data

Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 85:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Financial Condition

(dollars in millions, except for share amounts)

	December 31,

	2023		2022

Assets

Cash and cash equivalents	$	11,685 			$	8,856

Restricted cash	43 			41

Investment securities (includes available-for-sale securities of $13,402 and $11,987 reported at fair value with associated amortized cost of $13,451 and $12,167 at December 31, 2023 and 2022, respectively)	13,655 			12,208

Loan receivables

Loan receivables	128,409 			112,120

Allowance for credit losses	(9,283)			(7,374)

Net loan receivables	119,126 			104,746

Premises and equipment, net	1,091 			1,003

Goodwill	255 			255

Other assets	5,667 			4,597

Total assets	$	151,522 			$	131,706

Liabilities and Stockholders' Equity

Liabilities

Deposits

Interest-bearing deposit accounts	$	107,493 			$	90,151

Non-interest-bearing deposit accounts	1,438 			1,485

Total deposits	108,931 			91,636

Short-term borrowings	750 			-

Long-term borrowings	20,581 			20,108

Accrued expenses and other liabilities	6,432 			5,618

Total liabilities	136,694 			117,362

Commitments, contingencies and guarantees (Notes 15, 18 and 19)

Stockholders' Equity

Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 570,837,720 and 569,689,007 shares issued at December 31, 2023 and 2022, respectively	6 			6

Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 10,700 shares issued and outstanding at December 31, 2023 and 2022, respectively	1,056 			1,056

Additional paid-in capital	4,553 			4,468

Retained earnings	30,448 			28,207

Accumulated other comprehensive loss	(225)			(339)

Treasury stock, at cost; 320,734,860 and 302,305,216 shares at December 31, 2023 and 2022, respectively	(21,010)			(19,054)

Total stockholders' equity	14,828 			14,344

Total liabilities and stockholders' equity	$	151,522 			$	131,706

The table below presents the carrying amounts of certain assets and liabilities of Discover Financial Services' consolidated variable interest entities ("VIEs"), which are included in the consolidated statements of financial condition above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services.

	December 31,

	2023		2022

Assets

Restricted cash	$	43 			$	41

Loan receivables	$	30,590 			$	25,937

Allowance for credit losses allocated to securitized loan receivables	$	(1,347)			$	(1,152)

Other assets	$	3 			$	3

Liabilities

Short- and long-term borrowings	$	11,743 			$	10,259

Accrued expenses and other liabilities	$	19 			$	14

See Notes to the Consolidated Financial Statements.

-85-

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 86:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-

DISCOVER FINANCIAL SERVICES

Consolidated Statements of Financial Condition

(dollars in millions, except for share amounts)

	December 31,

	2023		2022

Assets

Cash and cash equivalents	$	11,685 			$	8,856

Restricted cash	43 			41

Investment securities (includes available-for-sale securities of $13,402 and $11,987 reported at fair value with associated amortized cost of $13,451 and $12,167 at December 31, 2023 and 2022, respectively)	13,655 			12,208

Loan receivables

Loan receivables	128,409 			112,120

Allowance for credit losses	(9,283)			(7,374)

Net loan receivables	119,126 			104,746

Premises and equipment, net	1,091 			1,003

Goodwill	255 			255

Other assets	5,667 			4,597

Total assets	$	151,522 			$	131,706

Liabilities and Stockholders' Equity

Liabilities

Deposits

Interest-bearing deposit accounts	$	107,493 			$	90,151

Non-interest-bearing deposit accounts	1,438 			1,485

Total deposits	108,931 			91,636

Short-term borrowings	750 			-

Long-term borrowings	20,581 			20,108

Accrued expenses and other liabilities	6,432 			5,618

Total liabilities	136,694 			117,362

Commitments, contingencies and guarantees (Notes 15, 18 and 19)

Stockholders' Equity

Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 570,837,720 and 569,689,007 shares issued at December 31, 2023 and 2022, respectively	6 			6

Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 10,700 shares issued and outstanding at December 31, 2023 and 2022, respectively	1,056 			1,056

Additional paid-in capital	4,553 			4,468

Retained earnings	30,448 			28,207

Accumulated other comprehensive loss	(225)			(339)

Treasury stock, at cost; 320,734,860 and 302,305,216 shares at December 31, 2023 and 2022, respectively	(21,010)			(19,054)

Total stockholders' equity	14,828 			14,344

Total liabilities and stockholders' equity	$	151,522 			$	131,706

The table below presents the carrying amounts of certain assets and liabilities of Discover Financial Services' consolidated variable interest entities ("VIEs"), which are included in the consolidated statements of financial condition above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third-party liabilities of consolidated VIEs only and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services.

	December 31,

	2023		2022

Assets

Restricted cash	$	43 			$	41

Loan receivables	$	30,590 			$	25,937

Allowance for credit losses allocated to securitized loan receivables	$	(1,347)			$	(1,152)

Other assets	$	3 			$	3

Liabilities

Short- and long-term borrowings	$	11,743 			$	10,259

Accrued expenses and other liabilities	$	19 			$	14

See Notes to the Consolidated Financial Statements.

-85-

,
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Income

(dollars in millions, except for share amounts)

 	For the Years Ended December 31,

 	2023		2022		2021

Interest income

Credit card loans	$	14,438 			$	10,632 			$	8,717

Other loans	2,515 			1,870 			1,734

Investment securities	449 			179 			182

Other interest income	443 			183 			18

Total interest income	17,845 			12,864 			10,651

Interest expense

Deposits	3,886 			1,257 			661

Short-term borrowings	5 			2 			-

Long-term borrowings	855 			606 			473

Total interest expense	4,746 			1,865 			1,134

Net interest income	13,099 			10,999 			9,517

Provision for credit losses	6,018 			2,359 			218

Net interest income after provision for credit losses	7,081 			8,640 			9,299

Other income

Discount and interchange revenue, net	1,447 			1,380 			1,188

Protection products revenue	172 			172 			165

Loan fee income	763 			632 			464

Transaction processing revenue	303 			249 			227

(Losses) gains on equity investments	(9)			(214)			424

Other income	85 			75 			66

Total other income	2,761 			2,294 			2,534

Other expense

Employee compensation and benefits	2,434 			2,139 			1,986

Marketing and business development	1,164 			1,035 			810

Information processing and communications	608 			513 			500

Professional fees	1,041 			871 			797

Premises and equipment	89 			118 			92

Other expense	680 			540 			620

Total other expense	6,016 			5,216 			4,805

Income before income taxes	3,826 			5,718 			7,028

Income tax expense	886 			1,344 			1,606

Net income	$	2,940 			$	4,374 			$	5,422

Net income allocated to common stockholders	$	2,859 			$	4,286 			$	5,323

Basic earnings per common share	$	11.27 			$	15.45 			$	17.75

Diluted earnings per common share	$	11.26 			$	15.44 			$	17.74

See Notes to the Consolidated Financial Statements.

-86-