Discover Financial Services (NYSE:DFS) Q4 2014 Earnings Conference Call - Final Transcript

Jan 21, 2015 • 05:00 pm ET


Discover Financial Services (NYSE:DFS) Q4 2014 Earnings Conference Call - Final Transcript


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Welcome to the Q4 2014 Discover Financial Services Earnings Conference Call. My name is Leslie and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Mr. Bill Franklin. Mr. Franklin, you may begin.

Bill Franklin

Thank you, Leslie. Good afternoon, everyone. We appreciate all of you for joining us. Let me begin as always with Slide 2 of our earnings presentation, which is on the Investor Relations section of

Our discussion today contains certain forward-looking statements about the company's future financial performance and business prospects which are subject to risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings press release, which was furnished to the SEC in an 8-K report and in our 10-K and 10-Qs which are on our website and on file with the SEC.

In the fourth quarter 2014 earnings materials, we have provided information that compares and reconciles the company's non-GAAP financial measures with the GAAP financial information, and we explain why these presentations are useful to management and investors. We urge you to review that information in conjunction with today's discussion.

Our call this afternoon will include formal remarks from David Nelms, our Chairman and Chief Executive Officer, and Mark Graf, our Chief Financial Officer. After Mark completes his comments, there will be time for a question-and-answer session. During the Q&A period, it would be very helpful if you limit yourself to one question and one related follow-up, so we can make sure that everyone is accommodated.

So now, it is my pleasure to turn the call over to David.

David Nelms

Good afternoon, everyone, and thank you for joining us today. Starting on Slide 3 of the earnings presentation. We reported fourth quarter net income of $404 million and diluted earnings -- per share of $0.87 after some one-time charges in the quarter. Excluding these charges, adjusted net income was $553 million or $1.19 of adjusted diluted earnings per share.

Mark will cover the details of the charges later, but the largest was the previously announced $178 million elimination of our credit card -- rewards forfeiture reserve. We think the changes that we decided to make in our rewards program that resulted in this charge will be beneficial to our business and we are receiving favorable feedback from our card members. Our business model continues to deliver solid results.

Turning to Slide 4, Discover achieved total loan growth of 6% over the prior year. This was driven by strong growth in card and personal loans. Card receivables grew 6% this quarter. This growth is the result of the continuing success of Discover It driving new accounts and increasing wallet share with existing customers. Our focus on the prime revolver segment is working as evidenced by relative yield stability