Discover Financial Services (NYSE:DFS) Q3 2017 Earnings Conference Call - Final Transcript
Oct 24, 2017 • 06:00 pm ET
increase in the margin.
So it feels, again, very strong that we're benefiting from that positioning of the balance sheet to be asset-sensitive. And then, I think we're also seeing just good prudent management of the funding of the assets and the nature of the assets that are coming on as well.
Thank you very much.
Your next question comes from Ryan Nash with Goldman Sachs. Please go ahead.
Hi, good evening, guys.
Hi, Mark, I guess just a different question on the reserve build this quarter. Can you maybe talk about how much of the reserve build was due to growth versus how much was from credit normalization. And I guess related to charge-offs, if you look at the breakdown of the 60 that you are up year-over-year, can you maybe contextualize how much of that is from the supply side seasoning versus maybe losses that you are seeing in the back book? Thanks.
A lot in there, Ryan, I'll try and touch on it all and I will give you credit for one quick follow-up, just in case I miss any of it. I would say a couple of different things. First of all, the primary driver of the provisioning is the growth that has been and continues to be the primary driver of the provisioning but then normalization factor is material, I don't want to downplay that too much, just to be clear.
I would say, if you think about the nature of build, if you take glimpse at the supplement which you can see is about a $111 million of that build was specifically related to the card business, there was an outsized build in personal loans to tune the $34 million, $35 million this time around reflecting that small book that we talked about a second ago and getting ahead and getting a junk provisioning for that out of the way.
And then I would say, the student loans piece of the equation, you saw uptick in the charge-off rate this quarter, that's really related to that seasoning we talked about earlier that higher vintage as well as we had a conversion that we went through on the student loan system on to our new platform, being the course to quarter end, probably weren't as diligent about working delinquencies for a couple of days in there too probably drove a little bit of that delta is my guess.
But, if you look at the reserve rate there, you can see it's up only 3 basis points. So at the end of the day, I would say, it really continues to be where we are seeing the strongest growth with the exception of the DTL portfolio is where we are seeing the greatest provisioning.
Got it. And maybe if I could just ask a quick question on personal. You saw loan growth on a year-over-year basis come in at about 400 basis points, yet it does look like the quarter-over-quarter growth did