All right. Welcome, everyone. We'll just get started. I'm pleased to have Discover CFO John Greene with us today. Welcome, John. Thank you. Great to be here. I appreciate the invitation. Yeah. Maybe you just update us on the status of the various supervisory actions that Discover is facing. Will those actions change anything you're doing operationally? Kind of, what kind of insight can you offer on the status of those? Right. Well, I appreciate you starting off with a softball on this. So, let me actually start with the fundamentals of the business. The fundamentals of the business are actually continue to be strong. So, phenomenal loan growth, sustained net interest margins, charge-offs performing largely to expectation and expenses. You know, we've invested in risk and compliance, and we're going to continue to do that. But fundamentally, the ability for this company to generate capital remains intact. In terms of the regulatory items, and there are, frankly, a lot of them, too many of them, too many for our board, too many for the executive team. And, you know, we're working to kind of be able to close these out in a way that is wholly compliant. So, to give you the update here. So we have a proposed Consent Order from the FDIC, so we talked about that on our second quarter earnings call. We have an open Consent Order from the CFPB, dated 2020, and there were some issues actually from a 2015 Consent Order that we didn't fully work through. So we've invested, we've invested a significant amount of money. So from 2021, when we first began talking about the investment in risk and compliance, we have invested an incremental $300 billion. We're going to invest what it takes in order to get to a spot where we want to be. We also disclosed on the second quarter call the card tiering issue, and that card tiering issue, you know, we've quantified a liability of $365 million. We conducted an internal investigation on that with the help of an outside law firm, and, you know, that investigation is near complete. So now where we are with that is, the findings have been shared with the regulators. We, as a leadership team, are in active dialogue with the regulators and merchants that were impacted by that. You know, we're waiting feedback from both the merchants and the regulators in order to be able to put a firm stake in that remediation plan. But it's proceeding to our expectations. Got it. Helpful color. So what gives you confidence that you can continue to grow the business, in light of the regulatory focus? So, as I said, our the fundamentals of the business remain strong. So, as we were in the throes of this, and as I said, it dates back to kind of the 2020 consent order, which is the first one that I was party to since I joined the firm in 2019. There's been a focus on getting the consumer compliance stuff to date. In that period, if you look back at last year, strong double-digit record loan growth, we had a high point of net interest margin, or near high point in net interest margin, and credit conditions and credit management remained super effective. As we go into 2023, those same fact patterns exist. So, top-line growth, very, very strong. Credit performing to largely to expectations, and Net Interest Margin and deposit funding continue to be really strong. So with that, gives me a level of confidence, and on top of it, we, we did launch a new product, the Cashback Debit program. And, you know, we're seeing initial indications that that will be very, very positively received by customers, current customers and potential customers. Got it. So, so you talked a little bit about the card product misclassification issue. Maybe can you just talk about whether or not, the investigation will result in any changes in the way you interact with customer-consumers and merchants? I don't believe so. You know, we've maintained a focus since the onset of the company to drive acceptance, and here in the U.S., we're in virtual parity with Visa and Mastercard, without great relationships with merchants. We discussed the issue. We've tried to be as transparent regarding the issue and our mistakes as we could, and we'll have further discussions as we work out the remediation point with our retained merchants. I don't believe there's anything from the merchant standpoint that will change, certainly then ensuring the card tiering is correct and transparent going forward. Got it. Helpful. So on your second quarter call, you updated your OpEx guidance, up low double digits for the year from the prior year. Have there been any changes to these expectations?...And then maybe just talk a little bit about what gives you confidence that the compliance costs will escalate, meaningfully. So, it's only been a month and a half, and there's been no change, so that's really good news. But on a serious point, as we sized that guidance for the total expense base, we took into account the anticipated increase in our compliance spend. We took into account the marketing efforts that would undertake the launch the Cashback Debit, and we feel good about the conviction around the ability to continue to grow profitably. So new customer acquisition that will generate great returns and capital for the business and the shareholders. The Cashback Debit program, I talked about that, very positive about it from that standpoint. So those investments will continue to be positive and deliver nice returns for us. The compliance that we size that. I feel like the complement of resources is balanced right now very heavily on consultants and third party. Over time, as we bring in more resources from other institutions that have been on a similar compliance journey, I think what the reliance on third parties will diminish and the conviction around the runway cost will increase. So for 2023, I feel very confident around the guidance we've provided. For 2024, you know, I'm looking at it. We're going through the budget process right now. We'll give an update, but the important context is that we began this focus back largely in the later half of 2020 and into 2021, and we've incrementalized the spending by $300 million. So in terms of the journey, I would say we're on middle innings of this journey. So, the idea that we're going to get, like, a massive surprise on this, I don't feel like that there's a high probability of that. Largely because where we are on this journey and frankly, our business model, right? We have four primary products. We have a long tenure of originating these. We're getting much, much issue identification and remediation of those issues. So, you know, my expectation and hope is that we're not going to get surprised on this, but, you know, other companies through this journey have been surprised and they're quality organizations. So, you know, I'm hoping we've learned from that and we're not going to make the same mistake, but, you know, there's no guarantees on this. Got it. Helpful. So, you talk about investing clients and risk management. We've heard John Owen say that over the last several months, you've hired over 200 new compliance officers. So other than headcount, what does this investment look like? Yeah. So as we go through this compliance journey, so what we want to make sure is that we have the right people, the right organization design, the right focus on issue identification and issue management. Be able to identify items and in a transparent and timely way, get those escalated, disclosed, and remediated. So that takes people, changes to process and some level of systems investment, and that's the journey we're going on right now. I mentioned earlier in a previous comment, the complement of resources around more third-party consultants. So as we evolve, and my expectation is the third parties, both legal and consulting resources, will begin to dissipate, and they'll be replaced by high-quality people that are employed by our company. Got it. Helpful. So can you remind us the changes that have been made to the management team over the last several months? Has the Discover changed in any way as a result? Yeah. So, not many over several months, but over a five-year period, a substantial amount of change. I'll talk about that in a second. But importantly, culture, a lot of focus there. So, you know, Discover a long history of a culture that prioritized great customer service and driving positive growth, and that results in a high level of capital to be generated, that there's no changes to that. So the focus in terms of culture is to make sure we continue to take care of our customers and treat them fairly. Our customer service rankings continue to be, you know, the highest in the industry, despite our failures in consumer compliance. So what the board and under Roger's leadership, there were a substantial amount of changes. So I'll just run through those to be specific. So recently hired a new CIO within the past couple months. Chief Legal Officer was hired at the beginning of this year. We hired a Chief Compliance Officer, I think it was back in 2021. Chief Risk Officer was appointed in 2021. New Head of Internal Audit was in 2020, and I joined in 2019. So a substantial amount of change at the highest level of the organization now. Now it's our time to be able to deliver and execute upon what we need to. Got it. Do you have an update on the timing of reinstating your share repurchase program? Like, what would it take to resume that? Yeah. So I don't have a specific timing update on it. I will say that capital allocation priorities of the company have not changed, so invest in the business is one, and then return excess capital to shareholders, number two. We paused the share repurchase program in the second quarter, and it wasn't without a level of consternation. But we did that because we thought it was important to ensure that the card tiering issue and the quantification of that issue and any potential ancillary risks were well understood. As we've moved through kind of the disclosure of it to the remediation plan, we're in dialogue with our regulators around that remediation plan. We're also, as I mentioned, in dialogues with our merchants. As we get more data points coming back in, we'll get a greater level of conviction around the ultimate kind of cost of this mistake. And then, when we have that view, we'll make a recommendation to the board to resume. But specific timing, I can't provide at this point. Okay, fair enough. So putting the regulatory issues aside, Discover's operating model produces consistently strong financial results. What do you attribute those strong results to, and do you expect them to change in any way? Yeah. So I touched upon a couple of them. So, first, there's a cultural aspect of it, right? So the strong focus on the customer and customer service. Second is the digital model. So being able to kinda target, from... I'll start with the card product first. Target kind of prime revolvers that have an appreciation for our reward structure and no annual fees. Really, really important. The kind of digital nature of our outreach, great, great customer service, the digital way that folks interface with us, and then ultimately the product itself. And we're operating in a space where there's a need and Discover's meeting that need nicely. Got it. So on that note, can we maybe just get an update on a few trends? What are you seeing in terms of consumer spending and payment rates? Yeah. So, the spending, so the sales data that we see, so we get weekly, monthly. Well, actually, we get daily, weekly, monthly sales data coming in. At a weekly level can move significantly. But for the month of August, what we've seen is sales increase year-over-year by 2%, so slowing of the sales trend. So look at last quarter, we were around 3%, but we've seen further slowing as our customer base is making what I think are good decisions in terms of how they're allocating dollars between kind of new spending activity and paying off their cards. We have seen the payment rate decrease, and what we've seen is more transactors turn to revolver. As you go back in time, in the pandemic, when the government was executing a number of different transfer payments, we saw savings rate go up, payment rate go up, spend at first decrease substantially and then increase substantially as people got more comfortable with their outcomes. Savings rates come down, and then sales continued to be high. And what we've seen now is overall savings rates tend to stabilize back to kind of historic norms, sales levels decreasing as consumers that are contending with inflation. The good news is that our consumers are actually in a situation where have wage inflation, where wage growth actually outpacing inflation now, which is different than it was a year ago. So, you know, my expectation is that, you know, against a really strong comp, you know, sales, you know, sales could, could stay around this level. And, and then into 2024 as the economy picks up, we'll have better insight in terms of, the year-over-year growth. That's helpful. So what about credit quality? How is credit performing, and have you taken any incremental action to tighten the credit box? Yeah, credit is performing to expectations largely. We did see a blip in the month of August for anybody who looks at the information release. The blip was about $15 million, and it had to do with some settlements. I don't expect that to repeat in September. We continue to take a look at it. But overall, what we're seeing is seasoning of the 2021 and 2022 vintages. And we're seeing consumers return to historical kind of payment patterns, and then also delinquency and charge-offs normalizing. I do, you know, as I look at kind of the balance of this year and into next year, I think peak charge-offs will likely be sometime in or mid- or second half of the year. Okay. Can you tell us how to think about the reserve rate? We see net charge-offs continuing to increase. You're guiding a 3.4%-3.6%, which means the 2023 exit rate is higher than historical averages. So what makes you comfortable with your reserve levels? Well, we look at reserves every single quarter and making sure that we take into account the macro environment, the performance of the portfolio, and we take a look at that at a product level in the aggregate. We're going to go through that process here over the next two or three weeks. You know, but the positives are employment and the consumer continue to remain strong. The chances of a soft landing for the economy seem to be increasing. We are seeing more transactors revolve, which, you know, is that being the case, that there's upward pressure on overall reserves as we take a look at kind of balances. You know, overall, John, I'm actually very comfortable with how the portfolio is performing. We'll run our multiple scenarios and get comfortable with a kind of overall CECL reserve that takes lifetime performance into account. Got it. So just to switch gears, how are deposit flows currently? You recently dropped down your NIM expectations to flattish from the prior year. What are your expectations on deposit pricing betas and your NIM trajectory? Yeah. So, you know, great performance from a deposit standpoint. So we, we'll, we'll generate well over $10 billion of incremental deposits, this year. We'll, we'll probably be up $3 billion in the quarter. You know, we're, we're seeing great appetite for our, our products, our deposit products, and this is without the full launch of the Cashback Debit program. This is largely the existing kind of online savings account and CDs. You know, you know, our, our, our posture hasn't changed at all. So we're not a price leader here, so we try to compete on customer, on customer service, on a competitive offer, and, and then good execution from a marketing standpoint. And we've been able to do that throughout 2023. So, so overall, very, very positive. Specific to deposit betas, slightly higher than I anticipated at the beginning of the year. So at the second quarter call, I said they're around 70, and what we did see is the competition for deposits did increase, you know, somewhat significantly after the bank failures in the first and second quarter, that those three institutions. So the value of a consumer deposit underneath the FDIC threshold significantly increased for institutions, and the competitive nature of pricing reflected that. As I... You know, we benchmark ourselves against some of the digital institutions. And again, we're not a price leader, and we'll compete on those factors that I mentioned. Overall, deposit betas, I don't know how it's going to shake out for the year. I do sense it's going to be somewhere in that 70-70 range. The impact on NIM is certainly as we price up deposits, net interest margin will contract, but there's a bunch of other factors impacting net interest margin in addition to deposit pricing. So NIM, in terms of that guidance we provided around 11, remains intact. Got it. Helpful. So, how's the Cashback Debit product progressing? Do you still have a mass marketing campaign this year? Yeah. So, so well. It's proceeding very, very well. So, the acceptance rates or the offers are going out, the acceptance rate is where we anticipated. Funding rate is exactly where we thought it would be. Fraud rate has been tightly managed and is below our expectations, so that's a positive. So overall, we're in a good position to kind of kick off the mass marketing campaign here in late third quarter or fourth quarter. Got it. Okay, so just to switch gears, your capital requirements are likely to change with proposals like TLAC and Basel III Endgame. So, what's your reaction to these proposals, and what do they mean for Discover? Yeah. So, my reaction is probably less important than others on this point. I will say that as we've tried to manage this, we have managed capital overall. We've been conservative in our CET1 target, so we put out there 10.5%. We've been substantially above that. These proposals will increase the level of capital that the company is measured by. So it'll probably have a negative impact on capital, somewhere between, depending on the final rulings, you know, 1.5%-1%. Might be a little bit more than that. You know, again, we're well above that, so the capital generative nature of the business can certainly absorb that, and we can continue to invest for growth and then return excess capital to shareholders. So there's a lot of, lot of movement and, and actually, work by kind of the financial services institution to take a look at that and see what possible modifications can be made to the proposals. And wherever it lands, there'll be probably a three-year phase-in, which we'll be able to manage very well, too. Great, helpful. So I'm going to pause right here and go to the one audience response question that I have. So operators, can you cue that up? Over the next year, would you expect your position in Discover to, one, increase, two, decrease, or three, stay the same? Okay, so mostly stay the same, and then, balance between increase and decrease. Good tie, yeah. Yep. Okay, so opening up to Q&A right now. Any questions from the audience? You got two up in the front. We'll go to the second row first. Hey, thanks. I guess, could you give an update on your student loan business? I know a lot of your regional peers have been, as they've rationalized their, optimized their RWAs, they've been exiting the student loan business. I guess, like, what are your thoughts on that going forward? You know, are you looking to increase that or try to, you know, gain market share? Yeah. Good, good question. So, we just went through what we call peak season, so that ended on August 31st. We're preparing for what we call mini peak origination season, that will run through the end of December. You know, we're focused, laser focused on getting the consumer compliance issues fixed, and we're going to continue to be focused there. We talked about on the second quarter call, not specific to student loans, but across the portfolio, that we've continued to take a look at all our products, the returns and the use of capital, and try to work to optimize our allocation of capital. We're going to continue to do that, and, you know, we've got more work to do. And then when we finalize that, we'll have views on all of the products. Then right next to you. I think I heard you say that you were in the middle innings of the compliance issues. Is that another $300 million of expense? You're not talking incremental, are you? I am. You are. I don't believe so. Certainly, that would be a seismic surprise, and I talked about that in earlier comments. We're gonna continue to invest whatever we have to, to get these issues behind us. And I talked about kind of the transition from kind of third-party resources to our resources, which I think over time will make us more efficient in that spend. I don't expect a seismic drop in it, going out two to three years either. But what I do expect is 2024 is a year that we're going to kind of evaluate what we need. If we need to put in incremental dollars and resources, we're going to do that. Then as we navigate and get better at issue identification, issue management, transparency issues, remediation of issues, and then improvements in our systems and simplification of what we're doing, I think it'll allow us to be more efficient with our compliance spend. But specifically, 2023, I gave detailed guidance on. 2024, I'm hesitant to do that right now because we're going through the budget process. But again, it's hard to spend an incremental $300 million in an institution of our size and do it in a smart sort of way. So I don't believe that'll be the case. Thank you. Got one question over there. Maybe just a point of clarification on the additional regulatory requirements for capital. Were you referring to additions to the regulatory minimum level or requirements above the current level? Yeah. It would be additions to regulatory minimums. Regulatory minimums. We're well above that with our target, as you know. Yeah. Thank you. Got one question back there to the left. Hey, just wanted to ask, you kind of talked about, you know, you guys are in the midst of kind of the remediation process as it relates to the card tiering issue. You know, I know it's kind of tough to speculate on timeline, but, you know, how long do you kind of think it could take to kind of work through that and kind of get to the point where you have some clarity on, you know, your ability to kind of, you know, turn the buy back on again? Yeah, good question. So, you know, we're in dialogues with the merchants, and we can certainly control that aspect of it. The dialogues with our regulators, we have less control over the nature of the responses and the, I'll say, the toing and froing as we ground ourselves on where this is. We did have a meeting literally yesterday with a number of the regulators and, you know, my expectation is we're gonna continue to have some dialogue and, you know, I'd be hopeful that by the end of the year, we'll have a view, but I don't have certainty on that. All right. Well, if there are no more questions, we'll just wrap up with that. Thank you. All right. Thank you, Jerry. Appreciate it.