Q2 2020 Discover Financial Services Earnings Call
[music].
Energy.
Ladies good morning, and my name is Christina Lake that 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 he would like to ask a question at that time. Please press star one on your Touchtone phone. If you should need assistance. Please press star zero. Thank you I will now turn the call over to Mr., Craig Streem head of Investor Relations. Please go ahead.
So thank you very much and welcome everybody to more call. This morning, we will begin on slide two of our earnings presentation, which you can find in the financial section of our Investor Relations website Investor Relations Dart discovered dot com. Our discussion. This morning contain certain forward looking statements that are subject to risks and uncertainties that may cause.
Actual results to differ materially please refer to our notice 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 tried green, our Chief Financial Officer, and after we conclude our formal comments there will be time for QNX session and we sq pleased 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 todays call.
Last quarter's call we discussed the impacts of the cobot 19 pandemic on our employees customers and business, while I'm 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 cobot 19 and the.
Pass 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 100% US based customer service team, our operating effectively in a remote environment and we have informed employees. They will not be required to return to our physical locations into app.
After January one 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're 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 income.
Looking at point of sale with Amazon and pay Pal 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 skip a pay programs. Since we launched this program in mid March we have helped over 662000 customers across all of our products and in fact about 60% of total loans enrolled have already exited the program.
The skip 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 customer by customer basis.
Now to our results for the quarter, we generated a net loss of $368 million or $1.20 cents per share.
The most significant driver of this was a 1.3 billion dollar reserve build in recognition of further deterioration in the macroeconomic outlook subsequent to March 30 Onest.
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 build 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%.
3% lower card loans, while down year over year, both compared favorably versus other issuers, principally due to our greater concentration everyday and online spend categories as opposed to TNT.
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 TNT spending excluding this operating expenses were down six per.
Sent 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 through improved 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 contact list and secure remote commerce. Since the end of 2019, we've seen a 70% increase in contact with spending I'm pleased to say we are on track to have most of our top 200 merchants enabled for contact list in Htwo.
120 and to have contact was cards issued to the majority of our card members by the ended the year.
Consumers have also shifted to much more online spending which makes our investments and 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've 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 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 shifting economic environment, including taking appropriate actions to manage expense capital credit and liquidity.
Our capital position combined with advances and analytics and credit risk management put us in great shape to return to profitable growth when conditions are right.
Today, a 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 lower 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 NIM compression and lower net discount in interchange revenue, reflecting decreased sales volume.
Net interest margin was 9.81% 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 in interchange revenue decreased 18% driven by the decline in sales volume. This was partially offset by a 16% decrease in rewards cost.
Other income was it was up due to a $44 million gain on 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 dollar increase in reserves, primarily due to further deterioration in the economic outlook.
I will 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 us economy.
The majority of the expense reduction was in brand marketing and card acquisition cost as we align 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 dollar noncash intangible asset impairment charge as result of the slowdown in cross border travel and entertainment spending.
Apart from the onetime 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 remained stable in the quarter.
Card charge offs increased 41 basis points from the prior year, mainly due to 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 skip 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.
That 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 that 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 benefited 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 six which shows our allowance for credit losses.
In the quarter, we added $1.3 billion to be loans, primarily due to further deterioration in the macroeconomic outlook.
As we considered the level of allowances needed we modeled several different scenarios. This 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 Twentytwenty.
Slowed 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 skipper pay program leveraging our previous experience with disaster relief.
We also considered unemployment reports in June and July show, which showed higher permanent unemployment and the impact of recent increases in Kogan 19 cases.
Turning to slide seven which detailed 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 weekend in April 18th.
Since then we've seen steady improvement across almost every category ft economy reopened.
Sales were down just 3% through the first half of July.
Since then we have seen steady improvement across almost every category at the economy reopened.
We continue 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 has been exceptionally strong up 19% in the quarter on high consumer demand.
We also benefited from adding home depot to our 5% rewards category.
Strong online spending growth also contributed to solid retail sales in the quarter.
Travel restaurants, and gas continued to be the most negatively impacted categories.
Slide eight highlights enrollment trends in our skip a pay program, which offers relieved to customers experiencing financial stress dude.
We saw the peak in the card program during the first week to week of April at $673 million first time enrollments have steadily decrease since then in the week of July 12 enrollments decreased to just $35 million.
To date, we enrolled a total of $3.4 billion and card loans. However, the majority of customers needed only one month of assistance and as of July 13th.
Over 70% of card loans, we're no longer enrolled both of those out of the program approximately 80% have returned to making payments.
Thanks.
Yes.
Moving to slide nine our common equity tier one 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 remain suspended today.
We've continued to 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 3.5% with the final FCB expected towards the end of the third quarter.
We will determine our share repurchase and dividend action subject to the final stress capital buffer.
Any other regulatory limitations.
And board approval.
Our liquidity.
Portfolio remains strong with $27 billion in liquid assets and has increased over $7 billion from March 30 Onest.
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 will 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 our continued to invest in core capabilities. So we're prepared for the recovery when it comes.
Outside of a onetime item operating expenses were down as we started to benefit from our expense reduction programs.
Credit performance remained stable, but some deterioration is expected in the coming quarters.
We took a conservative reserving approach and added $1.3 billion to the lots 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 and I wanted to announce that after a career consumer finance, including many years at discover Craig Streem has informed us of its desire to retire im sure. Most if not all of you have interacted with Craig over that time and enjoyed a great relationship with them.
He has been an important partner to Roger our leadership team and for me.
He has 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 entities in place.
You will have plenty of opportunity of wish him well as we all do.
That concludes our formal remarks, so I'll turn the call back to our operator to both on a full lines for community.
At this time, if you would like to ask a question. Please press.
The Q you may do by pricing the Pope Cowen key.
We remind you please pick up your hands.
Optimal sale qual.
Hey, our first question from Sanjay Sakhrani with KBW.
I'm glad you guys are doing well and congratulation.
Question on.
The reserve build I'm curious.
If you feel like what this reserve build that you're pretty much done provided there is no significant change to the macro outlook and then I know John you mentioned the forbearance.
Good day has positively impacted.
Delinquencies by modest amount, but.
Maybe you could just talk about.
What will drive the impacts that you're expecting in the next few quarters.
In credit quality. Thanks.
Okay.
Andre It's Roger I'll cover the first part and then pass it to John So in the reserve we.
Use the economic outlook that was considerably worse than the end of Q1.
Funder Steve.
Reserves for the life of loan for the loans, we have on our balance sheet and show further per 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 the John for the second.
Yes so.
Yes, so sanjay just to echo those comments, we feel we feel very good about the overall reserve and the conservative approach, we took especially given when you.
He looked at the overall portfolio performance that we've seen today and then actions we've taken.
Yes as far as to.
On the personal loans business. So overall.
Well, we feel very comfortable with our reserve today and.
As as the economic conditions.
Unfold.
That will have an impact either plus or minus on the overall reserve the four bar for Barents programs have.
Acted exactly as we had hoped that.
They've helped some customers manage through the pandemic and as as I said in my prepared remarks.
Most.
Hi majority of the people who entered the card program have exited and our repaying so very very mild impact too.
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 link on the delinquency numbers somewhere between five and 10 basis points.
Okay.
Thank you.
Your next question comes from the line of Bob Napoli with William Blair.
Thank you and good morning that Craig it's been a long time.
Big plant impact.
Yes. Thank you.
Roger.
So you've been with discover.
A long time, you seem a lot of recessions in changes.
I just wanted it is hoping you could give some thoughts on what you feel are going to be permanent changes to the industry and maybe just on I mean, if you could get that John from to hedge 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 my top 20, plus years it discover I've seen a lot of things, but I've never seen anything like this in terms of the speed in magnitude of the impact the pandemic has had on the economy.
I'll take any of us and businesses see Miss Nevertheless, 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.
Through digital channels, which again as it has been part of our business model.
You know consumers shifting from physical to digital purchases in there I think our advantage of having our proprietary network and the work we're doing with other major networks on Src will be helpful. When for physical purchases the shift to contact list.
So those are really some trends that have been there but has accelerated in a very significant way as a result of the coded pandemic.
Okay and Bob Johnson.
In terms of the sales trends.
We havent, we haven't broken it out out between.
Brick and mortar and online.
But what I, what I can point you to is retail in my prepared comments in terms of.
The growth we've seen there.
Lion share that has been as a result of online.
Online retailers and you know you know the major players there.
Which is driving colonsay.
Further demise of the brick and mortar retailers.
And accelerating the digital channel and you know for card.
Things.
Thanks to discover offers in terms of the network and.
Our.
Secure remote commerce that were.
Working on all will will position us well for that growing trend.
Thank you.
Your next question comes from the line of Don Vendetti with Wells Fargo.
Hi, good morning.
Short term question, if you could talk a little bit about than the NIM outlook in the near term and then Roger longer term coming out of the credit crisis. I recall, you guys came out and took share.
We're positioned pretty well.
I know we're in the midst of this but our how are you thinking about the other side at this.
Tumors can 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 NIM question. So in the first quarter, our our them was 10.21% and then in the second quarter it.
It came down to nine 9.81.
Im not going to give a bunch of detail here, but what I, what I can say as we look at the second quarter as unlikely that trough on NIM overall.
What.
Well, we've been able to do is execute pretty well in terms of deposit pricing.
And our our funding stack has.
Men such that more more expensive funding sources are fading fading away and we're getting a benefit there. So since a pandemic just to give you.
Some details we decreased.
Our online savings.
By about 60 basis points that's.
That's an immediate benefit to net interest margin in the company and then.
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 ended terms of gaining share you Doug 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 in sales this quarter from what I've seen from competitors reporting and thats within the significantly tightened credit box that we have one of the capabilities we.
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 Orenbuch with credit Suisse.
Great. Thanks.
I guess I was I was hoping you could talk a little bit about the the performance that you've seen.
With respect to borrowers that are exiting forbearance.
And the fact that you're assuming kind of 11% unemployment at year end, so as we think about.
The likelihood of either needing more or less reserving like how do you think about the information that we're going to get over the next several months.
In terms of how we think about reserving levels as we go forward.
Most of that thanks for the question. So it's a great question and honestly, it's a bit of art and science.
So.
Well, we have seen in terms of customers exiting as a.
About 80% of those those customers are making payments.
Ended.
And close to.
80, 80% of those are making full payments. So so we're feeling very good about the.
Customers coming out of the programs now to be honest those 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 the pay programs.
To see if if theres any.
Any potential issue, but.
As you as you step back from it.
The overall size of the portfolio versus the customers who have elected to go into skip a pay program.
Relatively small right. So right. So we're looking at the impact as as very very mild the delinquency trends have been.
From my standpoint, very very encouraging and.
I think that's that's a function of.
Some of the government stimulus function of.
Our collections operations and.
The value of credit card overall versus other payment forms or other other.
Other payment forms as well as what it means in terms of building operate in the digital economy. So so we like the fact that our portfolio as a high concentration of credit cards.
And we also think that.
We will come near the top on the payment prioritization through even even a tough tough downturn.
Okay.
Your next question comes from the line of many Gracie with Morgan Stanley.
Hi, good morning.
Morning.
Craig I'm going to Miss you.
[laughter].
Likewise Betsy. Thank you appreciate that.
Okay, so back to work.
Question I have is just around the reserving level I know you already addressed one question on that earlier in the queue ne.
But I've been getting some investor questions regarding how to think about the reserves that you are building today versus the loss experience you had during the great financial crisis now granted it's very different.
Firemen, but the unemployment rate is relatively high and a little bit higher than what we had during the GFC. So I thought it ticked up to ask you. How you would answer that question, how should I think about what the right reserving level is for two days block versus the losses that you had during during the early crisis. Thanks.
So let me start by quite a bit about 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 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 show things like permanent unemployment there you need to adjust to that and so we're not just looking at the raw unemployment numbers as we do our mom.
I think I'll pass the John talk a bit about the reserve and then.
Thats the just one other piece.
And it's.
It's a relatively important difference here.
When you when you go back in time on the great recession versus where we are today. So.
The overall the industry that the quality of the originations is much better today than it was at the great that the Gregory session or prior to that in general higher Ficos across every single.
Form of.
Lending product delinquency levels coming into the recession this recession versus the the great recession.
Our our lower consumer financial obligation load.
Is.
Significantly lower.
Today than it was coming into the great recession and debt debt service load was also thus a lower today. So the consumer is stronger coming into this recession and.
Then coming into the great recession, the traditional links between unemployment and delinquency and charge offs.
We're trying to model that it's really hard to nail that down right now given given all the government government stimulus but.
Overall as I as I look at where we are today and based on our underwriting and that and where our card.
Card loan comes in the payment priorities I feel like we're very very well positioned versus.
Where the company was coming in at a great recession and then we also talked about inactive line from taken enacted lines down nearly.
The number so close to 70 billion.
So.
Sure.
We are prepared we're prepared for the worst but I feel like we're in.
Better position.
And then you've got this really high savings rate going on right now I mean to you you said in your analysis is a kind of bridge to a lower unemployment rate as you're thinking about reserving.
We didnt actually.
Quantify that but as we were making determinations on on economic scenarios and and frankly, the overall quantum of reserves and reserve coverage.
As one it was it was a point that helped us get to where we where we arrived.
Got it okay. Thanks thoughts.
Thanks, again and I wanted to ask a question. Please press star one on your Touchtone phone.
Your next question comes from the line of marked of rights with Barclays.
Yes. 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 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 I'll start with.
How we're expecting delinquencies and charge offs to roll in so so as I as I said earlier, the books held up really really well delinquency levels have come down.
We do think some of that is as result of stimulus.
We also.
Feel like our teams are doing a great job in terms of interacting with with our customer base.
Two.
Help help the customers get through tough times, those that are experiencing some trouble b.
The trajectory of 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 offs elevating in 21.
Perhaps peaking in later later part of 21, depending on the economic scenario that we're dealing with and then.
Starting to tail off in 22.
That that in terms of delinquency delinquency will.
We think we'll 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 the end Twentytwenty one.
In terms of the government programs, we did nothing in our modeling too.
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.
A shot the curve a little bit in terms of both delinquency and charge offs, yes, I mean, I think as you think about the importance of the government programs. It's less about the 1200 dollar check that a family gets as you think about life of loan losses, and what that will support it's really the impact of those on the overall economy and keeping.
The trough from being two d. so to John's point, we really think about just in terms of at a macro level as opposed to what those checks may do in one months for given household.
Okay got it thank you.
Once again to ask your question. Please press Star line.
Our next question comes from the line of main gel with Deutsche Bank.
Hi, good morning, guys.
Quick question I guess on the average balance sheet. So the average cash and securities will materially this quarter.
Just trying to get a sense on how you guys thinking about the securities portfolio, and whether or not you would extend duration to pick up some yield given the that NIM trop into queue. Thanks.
Yes.
So we've been pleased with how actually how the now the balance sheet has.
Come together.
Certainly the asset side has been.
The strong as we talked about in the prepared comments on the liability side, 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.
On the balance sheet were effectively a.
Added.
Interest rate.
Basically.
Balanced interest rate risk position so.
We're feeling good about that.
We're still.
Your last question comes from the line of Kevin Barker with Piper Sandler.
Good morning.
So we've seen a lot of controversy around the dividend.
On.
Several competitors or even in some other banks and I was just wondering how much.
How you think about the dividends going forward and how much of a priority is to maintain it given some shareholders what is important or just.
Maybe how you think about it.
Even the trajectory of your earnings.
Yes, 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.
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 were we were very disciplined into lesser extent involved in M&A. So.
That's what we like to do I would say in until the environment improves.
It's probably safe to expect continued heavy regulatory focus on return of capital and so we will have to adjust our strategies accordingly.
Only if they keep going with the four quarters rule.
That's something that again, it will depend going forward, but thats something that we've looked at bed, 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 algos.
And then regarding your comments on the charge off rate peeking into late 21.
I think we would have expected a little bit more of a.
A big bowls coming out of the for all periods and be expiring of a lot of the stimulus on could you just talk about how that.
What the cycles going to look like or how you envision it playing out with.
Charge offs playing out in the early 21, and then what it looks like in the back half yet so.
Were.
We're seeing that the portfolio continues to be really really stable as I said.
The payment programs.
We saw.
Obviously, the disclose level of.
Entries into the programs and then a surprising.
Surprising Lee 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 as as held up very very strong. So we're comfortable with that so so if you just looked at that where we are as of June Thirtyth and then just do a kind of straight role model. It out it's hard to see Andy Andy.
Massive massive increases in charge offs 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 offs.
Grow.
Through the year slowly and then.
Page.
I would call it evolves, but a higher level of overall charge offs.
In the in the middle to second half of 21.
Now that's what our that's that's how we're seeing it today.
Certainly would caveat that.
I'd say that.
Consumer behaviors really difficult to predict here in a time such as this.
Okay. So sorry, I can't be yes, sorry, I can't be more specific on that.
That's very uncertain time I understand thank you.
Ill now turn the floor back over to Craig Streem for any additional closing remarks.
Thanks, Chris I'll just thank you everybody for your interest as always were 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.