DFS
#We are working off of an operative assumption of one or two rate increases this year, as opposed to the four we were looking at on the forward curve toward the very end of last year.
I would say we have not yet seen the benefit really of repricing in the card book fully from the fed rate increase.
Because we don't reprice card customers until cycle date, so you will get some lift from that coming in.
So I think what we're trying to say in NIM is, there's an upward bias in NIM.
We are well-positioned right now.
We may choose to invest some of that increase in NIM in marketing dollars, some promotional dollars and other places to really drive the growth that I think is the key thing we understand the market wants to see from us.
So we may take some of that excess and reinvest it.
Absent doing that, you would have more NIM expansion than you are likely to actually see.
I would just say that the mix between balance transfer and sales can impact payment rates along with credit.
So certainly credit is great, and so that tends to relate to a bit higher payment rates than one would otherwise have.
But as we have shifted to a little more transaction volume turning into loans versus and a little less balance transfer on new accounts, that is going to impact the payment rates.
So people will tend to pay more of their sales down than they will of their balance transfer down.
I don't think that we are forecasting a big change in that relationship.
I think, <UNK>, some of the one-time expenses or some of the revenue reductions you see in the fee line actually are accretive to the P&L.
So for example, we called out I think $74 million in lost revenue next year from the mortgage business.
I would remind everybody when we exited the mortgage business, we said the reason we were doing it or one of the reasons we were doing is it was not P&L accretive.
So I think that's a very good point there.
If I think about the expense base generally right now, I think we are very lean, we are very efficient today as evidenced by that efficiency ratio.
We are always looking to find further efficiencies to get operating synergies and drive even greater returns on that.
As I said earlier, we do have some levers we can pull if we get there.
But I think those are the kind of levers you pull when you are in a turn in the credit cycle and you see things.
Right now, we're still trying to drive growth.
And I don't think you drive growth by coming in and trying to whack the heck out of expenses.
Especially when you are already as efficient on that as we are.
So we are trying to balance prudent investments and growth, maybe investing some of this additional NIM to drive that going forward.
No, I think there was a little bit of elevated fraud costs to the fourth quarter, and a little bit of EMV costs.
So I think as you continue to push the cards out, there's a costs associated with that.
On the flipside of the equation, I think the fraud was actually up a little bit as you have the fraudsters trying to get in that one last hit before ---+ well swiping is still very prevalent.
So I think there's a combination of both sides of the same coin that you're seeing show up in that line item.
Remember on EMV, the rollout for the industry is still in process.
So there's a lot of retailers that have not activated it yet.
I will tackle the reserving question, and <UNK> can tackle the strategic element of the question.
I would say, <UNK>, what's driving it really is seasoning of the portfolio.
You think you've seen double-digit growth rates there over the course of a number of years.
Personal loans don't season radically differently than credit card loans do.
There's a little bit of a change in the shape of the curve and it's not exactly the same, but they tend to season after origination.
You don't get a lot of first payment defaults when you do it prudently, thankfully.
So I would say it's just seasoning.
<UNK>'t expect any major deterioration of any kind in that portfolio, and the seasoning we are seeing is in line with expectations.
And what I would say on the strategic side is, we had record originations this year in that business.
Even with literally hundreds of marketplace competitors entering and buying for share.
And I think that part of the reason is that our ---+ the people that we're targeting tend to be very different than the credits that most of those are targeting.
Our average FICO score is 750, 760.
The figures I've seen from the leading companies in the marketplace space is sub 700 average.
And that's ---+ when every 20 points of FICO means a doubling of credit losses, that is a very big difference in target market.
So we think that we are still the leader in prime originations in the space.
In terms of whether there will be a shakeout, I'm sure there will be a shakeout.
I'm sure some people will survive, but I don't think that there will be hundreds of competitors, and it is an unproven model through the cycle.
I believe that our model of originating and holding versus just a originate and sale that relies solely on growth, and is you stop originating you don't have revenue.
I believe that a relationship owning the credits, being able to finance it on our balance sheet, and not having to rely on securitization markets that we have seen can completely dry up in a crisis.
I think is a more sustainable model, and so I really like our position in that business.
Answering your third question I guess first.
We think that Ariba is going to continue to produce a lot of volume growth in the short term.
It will be a while before it becomes a material contributor profitability wise.
We also think there may be some ancillary services that may provide some revenues that having that product, we are working on adding some additional functionality that may produce some revenue potential.
On student loans, I'm not sure I fully understood your question on the student loans.
No, I expect to originate more this year than we did last year.
But I don't expect a dramatic acceleration, but I do think that the credit trends look great.
The needs continue from customers, and I expect us to originate a bit more.
And, <UNK>, it is helpful to look at the organic book versus the acquired book, because we bought it a number of years ago is essentially in run off.
Sure.
