Discover Financial Services

Good morning, and my name is Christelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2020 Discover Finance Services earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If you should need assistance, please press star 0. Thank you. I will now turn the call over to Mr. Craig Stream, head of Investor Relations. Please go ahead.

Christelle, thank you very much, and welcome everybody to our call this morning. We will begin on slide 2 of our earnings presentation, which you can find in the financial section of our Investor Relations website, .discover.com. Our discussion this morning contains certain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our notices regarding forward-looking statements that appear in today's earnings press release and presentation. Our call today will include remarks from our CEO Roger Hochschild and, of course, John Green, our Chief Financial Officer. And after we conclude our formal comments, there will be time for a Q&A session, and we ask you please to limit yourself to one question. And if you have a follow-up, we'd like you to queue back in towards the end, and we'll try to accommodate as many participants as we can. And now it's my pleasure to turn the call over to Roger. Thanks,

Craig, and thanks to our listeners for joining today's call. On last quarter's call, we discussed the impacts of the COVID-19 pandemic on our employees, customers, and business. While I am pleased with our execution in the second quarter, we remain in a very challenging environment with considerable uncertainty as our country continues to struggle to stop the spread of COVID-19 and the impact on our economy remains very significant. Of course, the safety of our employees continues to be a top priority. All areas of the firm, including our 100% U.S.-based customer service team, are operating effectively in a remote environment, and we have informed employees they will not be required to return to our physical locations until after January 1, 2021, at the earliest. Our operating model supports our commitment to providing flexible work arrangements as long as necessary to ensure the safety of our staff and their families. For our customers, we continue to provide an industry-leading service experience, leveraging our digital capabilities, and with average answer times in our call centers remaining at pre-pandemic levels of under one minute. Our products are well positioned as consumers increasingly look for value in these challenging times. We are the only major bank with no annual fees on any of our credit cards and no fees on any of our deposit products. Our leadership position in cash rewards and flexible redemption options, including a point of sale with Amazon and PayPal, are serving us well as consumers are increasingly shopping online and concerns over the safety of travel are limiting the appeal of airline miles. We have continued to support impacted customers with our -a-Pay programs. Since we launched this program in mid-March, we have helped over 662,000 customers across all of our products, and in fact, about 60% of total loans enrolled have already exited the program. The -a-Pay program was intended to be a short-term option, and we plan to end program enrollments in August. After that, we'll continue to offer assistance to those who qualify on a -by-customer basis. Now to our results for the quarter. We generated a net loss of $368 million or $1.20 per share. The most significant driver of this was a $1.3 billion reserve bill in recognition of further deterioration in the macroeconomic outlook subsequent to March 31st. The credit performance in our portfolio has been stable, and we believe that the actions we've taken over the past few years, including reducing our contingent liability and the additional credit actions we implemented in March position us well. Nevertheless, the reserve bill reflects our view that persistent long-term unemployment will increasingly impact prime consumer lending portfolios. The pandemic continued to have a significant impact on sales volume as well as loan growth through the quarter. We saw sales down 16% and 3% lower card loans, while down year over year, both compared favorably versus other issuers, principally due to our greater concentration in everyday and online spend categories as opposed to T&E. Operating expenses of $1.1 billion were flat to the prior year and included a $59 million one-time impairment charge to our diners business related to the impacts of the slowdown in global T&E spending. Excluding this, operating expenses were down 6% year over year. We remain on track to deliver the $400 million of expense reductions we previously announced, even as we continue to invest in core capabilities, including analytics and data science. We expect these investments to strengthen our ability to achieve profitable growth and shareholder value, to improve targeting and personalization, better underwriting decisions, and enhanced collection strategies, just to name a few of the benefits. We're also responding to shifts in consumer preferences with our investments in contactless and secure remote commerce. Since the end of 2019, we have seen a 70% increase in contactless spending. I'm pleased to say we are on track to have most of our top 200 merchants enabled for contactless in 2020 and to have contactless cards issued to the majority of our card members by the end of the year. Consumers have also shifted to much more online spending, which makes our investments in secure remote commerce and our partnership with the other major networks to implement click to pay even more significant. Our disciplined approach to capital management and liquidity remains a top priority for us, particularly in the current environment. We have continued to see very strong demand for our consumer deposit products, even as we have been reducing rates. Consumer deposits are now nearly 60% of total funding, and we have reduced our online savings rate 59 basis points since early March. Discover has a very strong financial foundation, loyal customers, and a proven business model. I'm confident that we have taken the correct actions to strengthen the Discover franchise, and we're well prepared to continue to drive long-term value to our shareholders and customers. I'll now ask John to discuss key aspects of our financial results in more detail.

Thank you, Roger, and good morning, everyone. Taking a look at the quarter, we're pleased with our response to the rapidly shifting economic environment, including taking appropriate actions to manage expense, capital, credit, and liquidity. Our capital position, combined with advances in analytics and credit risk management, put us in great shape to return to profitable growth when conditions are right. Today, I'll recap the financial results for the quarter and provide details on our credit performance and loan provisions. Similar to last quarter, I won't review our standard slides on loan growth, payment volumes, or revenue and expense, but you can find our traditional disclosures on slides 11 to 16 in the appendix to this presentation. On slide four, looking at key elements of the income statement. Revenue, net of interest expense decreased 7% in the second quarter, primarily driven by lower net interest income due to NIMC compression and lower net discount and interchange revenue reflecting decreased sales volume. Net interest margin was .81% for the quarter, down 66 basis points from the prior year. This was driven by three factors. Average loans were flat year over year, reflecting the lower sales volume. Loan yields declined as the average prime rate was 225 basis points lower on a year over year basis due to Fed rate cuts in 2019 and 150 basis points cut in March this year. These were partially offset by lower funding costs. We moved aggressively to reduce our deposit rates. Gross discount and interchange revenue increased 18% driven by the decline in sales volume. This was partially offset by a 16% decrease in rewards cost. Other income was up due to a $44 million gain on the sale of an equity investment. The provision for credit losses was $2 billion and included net charge-offs of $767 million, which were up 7% from last year and a $1.3 billion increase in reserves, primarily due to further deterioration in the economic outlook. I'll provide additional comments on credit with the next slide. Operating expenses were flat to the prior year, but down 6%, excluding a one-time item. Marketing and business development expense was 42% lower year over year as we responded to the significant slowdown in the U.S. economy. The majority of the expense reduction was in brand marketing and card acquisition cost as we aligned marketing spend with the impacts of the economic environment and tightened credit criteria. Offsetting this, in our Diners Club International business, we booked a $59 million non-cash intangible asset impairment charge as a result of the slowdown in cross-border travel and entertainment spending. Apart from the one-time impairment charge, we anticipate realizing $400 million of expense reductions from our previous guidance range. We made good progress on the expense front in the second quarter and will continue this momentum through the balance of the year. As the economic environment evolves, we'll continue to monitor and take actions on expenses as conditions warrant. Turning now to slide five, showing credit metrics. Credit performance remains stable in the quarter. Card charge-offs increased 41 basis points from the prior year, mainly due to the seasoning of loan growth. The credit card 30-plus delinquency rate was down 17 basis points from last year and down 45 basis points from the prior quarter. The lower delinquency rate reflects the overall stability of the card portfolio with a very modest impact from the -a-Pay program. Our private student loan portfolio reported strong credit metrics in the quarter with net charge-offs nearly flat to the prior year. The 30-plus delinquency rate was down 25 basis points from the prior year and 18 basis points lower than the prior quarter. Credit performance in this product continues to benefit from tight underwriting and a high percentage of co-signed loans. Personal loan net charge-offs decreased 90 basis points year over year. The 30-plus delinquency rate was 42 basis points lower than the prior year and down 24 basis points from the prior quarter. These credit metrics benefit from disciplined underwriting and our strong customer service and collection efforts. While the overall portfolio performance has been stable through the second quarter, we do expect to see some deterioration in consumer credit in coming quarters. Moving to slide 6, which shows our allowance for credit losses. In the quarter, we added $1.3 billion to the allowance, primarily due to further deterioration in the macroeconomic outlook. As we considered the level of allowances needed, we modeled several different scenarios. The scenario to which we gave the greatest weight included a sharp increase in peak unemployment to a rate of 16%, recovering to 11% at the end of 2020, followed by a slow recovery over the next few years. We assumed an annualized real GDP decline of 30% quarter over quarter or down 10% on a year over year basis. The quarterly reserve calculation also included an overlay, which considers the impact of the -a-Pay program, leveraging our previous experience with disaster relief. We also considered unemployment reports in June and July, which showed higher permanent unemployment and the impact of recent increases in COVID-19 cases. Turning to slide 7, which details sales trends by category through mid-July. Total card sales volume decreased 16% in the second quarter. The greatest weekly decline was in mid-April when total sales were down 33% for the week ending April 18th. Since then, we've seen steady improvement across almost every category as the economy reopened. Sales were down just 3% through the first half of July. We've continued to see positive trends in retail, which were up 7% in the second quarter and 15% in the first half of July. Within the retail category, home improvements have been exceptionally strong, up 19% in the quarter on high consumer demand. We also benefited from adding home business to the retail category, which was up about 3% in the first quarter. We also added home depots who are 5% rewards category. Strong online spending growth also contributed to solid retail sales in the quarter. Travel, restaurants, and gas continue to be the most negatively impacted categories. Slide 8 highlights enrollment trends in our -a-Pay program, which offers relief to customers experiencing financial stress due to the pandemic. We saw the peak in the Cards program during the first week of April at $673 million. First-time enrollments have steadily decreased since then. In the week of July 12th, enrollments decreased to just $35 million. To date, we enrolled a total of $3.4 billion in card loans. However, the majority of customers needed only one month of assistance. And as of July 13th, over 70% of card loans were no longer enrolled. Of those out of the program, approximately 80% have returned to making payments. Moving to slide 9, our common equity tier 1 ratio increased 40 basis points sequentially, mainly due to decline in loan balances. In March, we suspended our share buyback program in response to the economic environment at the time, and it remains suspended to date. We've continued to fill out the balance sheet for the first quarter of the year. We will fund our quarterly dividend at 44 cents per share of common stock in line with requirements provided by our regulators and approved by our board of directors. Our preliminary stress capital buffer was set at .5% with the final SEB expected towards the end of the third quarter. We will determine our share repurchase and dividend actions subject to the final stress capital buffer, any other regulatory limitations, and board approval. Our liquidity portfolio remains strong with 27 billion dollars in liquid assets and has increased over 7 billion dollars from March 31st. Since the onset of the pandemic, we have been a leader in reducing rates on our consumer deposit products. Nevertheless, we've continued to see strong demand with average consumer deposits increasing 22% year over year and now making up 60% of total funding. We'll continue to look for opportunities to reduce deposit costs. To summarize the quarter, we're pleased with our results given the extremely challenging environment. We took swift action on expenses and are continuing to invest in core capabilities so we're prepared for the recovery when it comes. Outside of a one time item, operating expenses were down as we started to benefit from our expense reduction programs. Credit performance remains stable, but some deterioration is expected in the coming quarters. We took a conservative reserving approach and added 1.3 billion dollars to the allowance for credit losses. And finally, capital and liquidity both remain strong. While we remain conservative, given the continued level of economic uncertainty, we feel good about the actions we've taken today and the strength of the Discover franchise. Before we open up the call for Q&A, I wanted to announce that after a career in consumer finance, including many years at Discover, Craig Stream has informed us of his desire to retire. I am sure most, if not all of you, have interacted with Craig over that time and enjoyed a great relationship with him. He has been an important partner to Roger, our leadership team, and for me. He's been a wonderful team member and a terrific help with my transition into the company. Craig is going to continue to lead the IR team until his successor has been named and is in place. So you will have plenty of opportunity to wish him well, as we all do. That concludes our formal remarks, so I'll turn the call back to our operator to open up the lines for Q&A.

At this time, if you would like to ask a question, please press star one on your touchtone phone. If you wish to remove yourself from the queue, you may do so by pressing the pound key. We remind you to please pick up your handset for optimal sound quality. We'll take our first question from Sanjay Sekharani with KBW.

Thank you. Good morning. I'm glad you guys are doing well and congratulations, Craig. I guess my question is on the reserve build. I'm curious if you feel like with this reserve build that you're pretty much done, provided there's no significant change to the macro outlook. And then I know, John, you mentioned the forbearance or the skip of pay has positively impacted delinquencies by a modest amount. But maybe you could just talk about what will drive the impact that you're expecting in the next few quarters in credit quality.

Hey, Sanjay, it's Roger. I'll cover the first part and then pass it to John. So in the reserve, we I think took a conservative approach and used the, you know, an economic outlook that was considerably worse than the end of Q1. Under Cecil, as you know, right, that is reserved for the life alone for the loans we have on our balance sheet. And so further reserve increases would mean that we add further deterioration in the economic environment or would be based on the growth of the balance sheet as we look ahead. And I'll pass to John for the second

part. Yes. So, yes, Sanjay, just to echo those comments, you know, we feel very good about the overall reserve and, you know, the conservative approach we took, especially given when you look at the overall portfolio performance that we've seen today and actions we've taken back as far as 2017 on the personal loans business. So, overall, we feel very comfortable with our reserve today. And as the economic conditions unfold, you know, that'll have an impact either plus or minus on the overall reserve. The forbearance programs have acted exactly as we had hoped. They've helped some customers manage through the pandemic. And as I said in my prepared remark, you know, most, the high majority of the people who entered the CARD program have accident and are repaying. So very, very mild impact to delinquency reporting as well.

I'm just curious, is there a specific number in terms of the amount of benefit from the forbearance impact?

Yes, so it's actually relatively small on the delinquency numbers somewhere between five and ten basis points.

Okay, great. Thank you.

Our next question comes from the line of Bob Napoli with William Blair.

Thank you and good morning. Craig, it's been a long time. Congratulations and I hope you have some great plans. We've been talking a long time. Yep. Thank you. Roger, so you've been with discover a long time. You've seen a lot of recessions and changes. I just wondered if I was hoping you could give some thoughts on what you feel are going to be permanent changes to the industry. And maybe just, I mean, if you could get that, John, if you could give us some color on how much of your spend today is online and what it was prior to the pandemic.

Sure, so I was going to say in my twenty plus years at discover, I've seen a lot of things, but I've never seen anything like this in terms of the speed and magnitude of the impact the pandemic has had on the economy. You know, I don't think any of us in business has seen this. Nevertheless, you know, I feel like we were very, very well positioned for this going in. And I think over the long term, what you've seen is really an acceleration of some trends that were already there. So the migration out of branch to digital channels, which again has always been part of our business model. You know, consumers shifting from physical to digital purchases and there, I think, are our advantage of having our proprietary network and the work we're doing with other major networks on will be helpful. You know, when for physical purchases, the shift to contact list. So those are really some trends that have been there, but have accelerated in a very significant way as a result of the cobit pandemic. Okay,

and Bob, in terms of the sales trends, you know, we haven't we haven't broken it out between brick and mortar and online. But what I can point you to is retail and my prepared comments in terms of the growth we've seen there. A lion's share of that has been as a result of online retailers and you know, the major players there, which is driving, I'll say, further demise of the brick and mortar retailers and accelerating the digital channel. And, you know, for a car, you know, things, you know, things that discover offers in terms of the network and our secure remote commerce that we're working on all will will position as well for that growing trend. Thank you.

Your next question comes from the line of Don Vendetti with Wells Fargo.

Hi, good morning. Kind of a short term question. If you could talk a little bit about the NIMM outlook in the near term. And then Roger, longer term coming out of the credit crisis, if I recall, you guys came out and took share and were positioned pretty well. You know, I know we're in the midst of this, but how are you thinking about the other side of this? The consumer is going to have a fair amount of savings and do you look at these types of opportunities as market share gain or is that too premature to be thinking about that?

Okay, so why don't I start with the NIMM question? So, you know, in the first quarter, our NIMM was 10.21%. And then in the second quarter, it came down to 9.81. I'm not going to give a bunch of detail here, but what I can say is we look at the second quarter as likely the trough on NIMM overall. What we've been able to do is execute pretty well in terms of deposit pricing. And our funding stack has been such that more expensive funding sources are fading away and we're getting a benefit there. So since the pandemic, just to give you some details, we decreased our online savings by about 60 basis points. That's an immediate benefit to net interest margin in the company. And then, you know, through the balance of the year, we're going to continue to look for opportunities. So some of that will be based on the funding of our balance sheet and some of it will be based on the competitive environment that we're dealing with.

Yeah. And in terms of gaining share, you know, I think it's never too early to think about that. It feels like we're gaining share in the card business in terms of loans and sales this quarter from what I've seen from competitors reporting. And that's within the significantly tightened credit box that we have. One of the capabilities we've been working on is just the ability to react more quickly. And that helped us react very quickly to the pandemic in terms of tightening credit across all our products. But that should also help when job losses abate and it becomes time to widen the credit box as well. So we feel good about our capabilities and our ability to gain share across all of our products.

Thank you. Your next question comes from the line of Moshe Orinbuck with Credit Suisse.

Great. Thanks. I guess I was hoping you could talk a little bit about the performance that you've seen with respect to, you know, borrowers that are exiting forbearance and the fact that you're assuming, you know, kind of 11 percent unemployment at year end. So as we think about, you know, the likelihood of either needing more or less reserving, like, you know, how do you think about the information that we're going to get over the next several months, you know, in terms of how we think about reserving levels as we go forward?

Moshe, thanks for the question. So and it's a great question. And honestly, it's a bit of art and science. So what we have seen in terms of customers exiting is a, you know, about 80 percent of those customers are making payments. And close to 80 percent of those are making full payments. So we're feeling very good about the customers coming out of the programs. Now, to be honest, those segments inherently are likely to be a little bit more risky. So we continue to watch the differentiation on customers who elected to enter into one of the Skip to Pay programs to see if there's any potential issues. But, you know, as you step back from it, the overall size of the portfolio versus the customers who have elected to go into Skip to Pay program, relatively small. Right. So we're looking at the impact as very, very mild. The delinquency trends have been, you know, from my standpoint, very, very encouraging. And, you know, I think that's a function of some of the government stimulus, function of, you know, our collections operations and, you know, the value of a credit card overall versus other payment forms or other payment forms, as well as what it means in terms of ability to operate in the digital economy. So we like the fact that our portfolio has a high concentration of credit cards. And we also think that we'll come near the top on the payment prioritization through even a tough, tough downturn.

Your next question comes from the line of Betty Grasek with Morgan Stanley.

Hi, good morning. Morning. Craig, I'm going to miss you.

Likewise, Betsy. Thank you. Appreciate that.

Okay. So back to work. The question I have is just around the reserving level. I know you already addressed one question on that earlier in the Q&A. But I've been getting some investor questions regarding how to think about the reserves that you're building today versus the loss experience you had during the great financial crisis. Now, granted, it's very different, you know, environment, but the unemployment rate, you know, is relatively high and a little bit higher than what we had during the GFC. So I thought I'd take the opportunity to ask you how you would answer that question. How should I think about what the right reserving level is for today's book versus the losses that you had during the OE crisis?

Thanks. So let me start by talking a bit about the unemployment rate and then I'll pass it to John to talk on the reserves. I think the unemployment rate we're seeing now is very different. And we've talked a bit about temporary unemployment as well as the impact on sort of entry level retail, entry level hospitality, you know, entry level restaurant. And so you can't map total unemployment to losses in a prime card base the way that you saw that pattern in last downturn. And so things like permanent unemployment, you need to adjust to that. And so we're not just looking at the raw unemployment numbers as we do our modeling. I'll pass it to John to talk a bit about the reserve. And then,

Betsy, just one other piece. And it's a relatively important difference here when you go back in time on the great recession versus where we are today. So the overall, the industry, the quality of the originations is much better today than it was at the great recession or prior to that. In general, higher cycles across every single form of lending product. Delinquency levels coming into the recession, this recession versus the great recession are lower. Consumer financial obligation load is significantly lower today than it was coming into the great recession. And debt service load was also lower today. So the consumer is stronger coming into this recession than coming into the great recession. The traditional links between unemployment and delinquency and charge-offs, you know, we're trying to model that. It's really hard to nail that down right now given all the government stimulus. But overall, as I look at where we are today and based on our underwriting and where a card loan comes into payment priorities, I feel like we're very, very well positioned versus where the company was coming into the great recession. And then we also talked about inactive lines. We've taken inactive lines down nearly close to 70 billion. So we're prepared for the worst, but I feel like we're in a better position.

And you've got this really high savings rate going on right now. I mean, do you use that in your analysis as a kind of bridge to a lower unemployment rate as you're thinking about reserving? Yeah,

we didn't actually quantify that, but as we were making determinations on economic scenarios and frankly, the overall quantum of reserves and reserve coverage, you know, it was a point that helped us get to where we arrived.

Got it. Okay. Thanks so much.

Once again, in order to ask a question, please press star one on your touchtone phone. Your next question comes from the line of Mark Devry with Barclays.

Yeah, thanks. Could you give us a little more color about what we should expect from delinquency and charge off formation in the coming quarters and how, if at all, those expectations and your reserve levels are impacted by your expectations for benefits from different forms of government stimulus and different forms of lender forbearance across your customers' different financial obligations?

Okay, so the tricky question. So I'll start with how we're expecting delinquencies and charge us to roll in. So as I said earlier, the books held up really, really well. Delinquency levels have come down. You know, we do think some of that is as a result of stimulus. We also feel like our teams are doing a great job in terms of interacting with our customer base to help the customers get through tough times, those that are experiencing some trouble. The trajectory of charge offs based on what we're seeing right now looks like we would expect elevated charge offs starting more in the fourth quarter and then coming into 2021. That's frankly, it's tough to call right now because we're modeling out unprecedented scenarios here. But I think a good way to think about it is charge us elevating in 21, perhaps peaking in the later part of 21, depending on the economic scenario that we're dealing with. And then starting to tail off in 22. That in terms of delinquency, you know, delinquency will, we think, will start to tick up in the fourth quarter, perhaps as early as the third quarter, but we're not seeing any indicators yet. And then continue into 2021. In terms of the government programs, we did nothing in our modeling to reflect what's being kicked around right now in Washington in terms of the next round of stimulus. So, you know, that I think that could certainly push out the curve a little bit in terms of both delinquency and charge offs.

Yeah, I mean, I think as you think about the importance of the government programs, it's less about the $1200 check that a family gets as you think about life alone losses and what that will support. It's really the impact of those on the overall economy and keeping the trough from being too deep. So to John's point, we really think about it just in terms of at a macro level as opposed to what those checks may do in one month for a given household.

Okay, got it. Thank you.

Once again, to ask a question, please press star one. Your next question comes from the line of Ming Zhou with Deutsche Bank.

Hi, good morning, guys. Quick question, I guess, on the average balance sheet. I saw that average cash and securities are up materially this quarter. Just trying to get a sense on how you guys are thinking about the securities portfolio and whether or not you would extend duration to pick up some yield given the NIMMA at a trough in 2Q. Thanks.

Yeah, so, you know, we've been pleased with, you know, how actually how the balance sheet has come together. Certainly the asset side has been strong as we talked about in a prepared comment. On the liability side, you know, we've seen great appetite on our for our deposit products, which is positive. We have also been able to avoid wholesale funding. We're not looking to substantially change any of the any of the duration of any of the liabilities that we see on the balance sheet. We're effectively a added interest rate, basically a balanced interest rate risk position. So we're feeling good about that.

Still,

your last question comes from line of Kevin Barker with Piper Sandler.

Good morning. So, you know, we've seen a lot of controversy around the dividend on several competitors or even some other banks. And I was just wondering how much how you think about the dividend going forward and how much of a priority is to maintain it given some shareholders look as important or just maybe how you think about it given the trajectory of your earnings.

Yeah, so so I would guide you to sort of looking back over the last 10 years where you've seen a very clear strategy from Discover. Given that the high returns we generate from our business, an important part of how we manage capital is returning it to shareholders in the in the form of a dividend. And we've had historically a measured increase to those dividends as well as buying back stock. And we're we were very disciplined and to lesser extent involved in M&A. So that's what we like to do. I would say until the environment improves, it's quite safe to expect continued heavy regulatory focus on return of capital. And so we will have to adjust our strategies accordingly. Certainly, if they keep going with the four quarters rule, that's something that again, it'll it'll depend going forward. But that's something that, you know, we've looked at. But I think we're going to watch and work with our regulators on this. But management's intent is unchanged. And so we'll have to see how it goes.

And then regarding your comments on the charge off rate peaking into late 21. I mean, I think we would have expected a little bit more of a, you know, a big bulge coming out of the deferral periods and the expiring of a lot of the stimulus. Could you just talk about how the, you know, what the cycle is going to look like or how you envision it playing out with charge off playing out in the early 21 and then what it looks like in the back end?

Yeah, so, you know, we're we're seeing that the portfolio continues to be really, really stable. As I said, the payment programs, you know, we saw. Obviously, the disclosed level of entries into the program and then a surprising, surprisingly high number from our perspective, exiting after one payment, which to me was a good sign as they exited the payment. The payment percentage of payment rate of those customers has held up very, very strong. So we're comfortable with that. So, so if you just look at at where we are as of June 30th, and then just do a kind of straight role model it out, it's hard to see any any massive, massive increases in charge off for the balance of the year, even if things deteriorate from from the consumer standpoint. So, so that means what we're likely to see is charge off grow through the year slowly and then I wouldn't call it a bulge, but a higher level of overall charge off in the in the middle to second half of 21. Now, that's what that's that's how we're seeing it today. You know, I certainly would caveat that and say that, you know, consumer behavior is really difficult to predict here and in a time such as this. So, sorry, I can't be. Yeah, sorry. I can't be more specific on that.

Yeah, it's very uncertain time. I understand. Thank you.

I will now turn the floor back over to Craig stream for any additional closing remarks.

Thanks, Chris. Just thank you everybody for your interest. As always, we're available. Get back to us if you need any follow up. Thanks. Have a good day. Thank you.

This concludes today's conference call. You may now disconnect.