AMERICAN EXPRESS CO 10-K form for the fiscal year ended 2023-12-31, page 94: 
CONSOLIDATED STATEMENTS OF INCOME
|    |                                                                           |        |        |      |        |      |        |         |    |        |
|---:|:--------------------------------------------------------------------------|:-------|:-------|:-----|:-------|:-----|:-------|:--------|:---|:-------|
|  1 | Year Ended December 31 (Millions, except per share amounts)               | 2023   |        | 2022 |        | 2021 |        |         |    |        |
|  2 | Revenues                                                                  |        |        |      |        |      |        |         |    |        |
|  3 | Non-interest revenues                                                     |        |        |      |        |      |        |         |    |        |
|  4 | Discount revenue                                                          | $      | 33,416 |      |        | $    | 30,739 |         | $  | 24,563 |
|  5 | Net card fees                                                             | 7,255  |        |      | 6,070  |      |        | 5,195   |    |        |
|  6 | Service fees and other revenue                                            | 5,005  |        |      | 4,521  |      |        | 3,316   |    |        |
|  7 | Processed revenue                                                         | 1,705  |        |      | 1,637  |      |        | 1,556   |    |        |
|  8 | Total non-interest revenues                                               | 47,381 |        |      | 42,967 |      |        | 34,630  |    |        |
|  9 | Interest income                                                           |        |        |      |        |      |        |         |    |        |
| 10 | Interest on loans                                                         | 17,697 |        |      | 11,967 |      |        | 8,850   |    |        |
| 11 | Interest and dividends on investment securities                           | 128    |        |      | 96     |      |        | 83      |    |        |
| 12 | Deposits with banks and other                                             | 2,158  |        |      | 595    |      |        | 100     |    |        |
| 13 | Total interest income                                                     | 19,983 |        |      | 12,658 |      |        | 9,033   |    |        |
| 14 | Interest expense                                                          |        |        |      |        |      |        |         |    |        |
| 15 | Deposits                                                                  | 4,865  |        |      | 1,527  |      |        | 458     |    |        |
| 16 | Long-term debt and other                                                  | 1,984  |        |      | 1,236  |      |        | 825     |    |        |
| 17 | Total interest expense                                                    | 6,849  |        |      | 2,763  |      |        | 1,283   |    |        |
| 18 | Net interest income                                                       | 13,134 |        |      | 9,895  |      |        | 7,750   |    |        |
| 19 | Total revenues net of interest expense                                    | 60,515 |        |      | 52,862 |      |        | 42,380  |    |        |
| 20 | Provisions for credit losses                                              |        |        |      |        |      |        |         |    |        |
| 21 | Card Member receivables                                                   | 880    |        |      | 627    |      |        | (73)    |    |        |
| 22 | Card Member loans                                                         | 3,839  |        |      | 1,514  |      |        | (1,155) |    |        |
| 23 | Other                                                                     | 204    |        |      | 41     |      |        | (191)   |    |        |
| 24 | Total provisions for credit losses                                        | 4,923  |        |      | 2,182  |      |        | (1,419) |    |        |
| 25 | Total revenues net of interest expense after provisions for credit losses | 55,592 |        |      | 50,680 |      |        | 43,799  |    |        |
| 26 | Expenses                                                                  |        |        |      |        |      |        |         |    |        |
| 27 | Card Member rewards                                                       | 15,367 |        |      | 14,002 |      |        | 11,007  |    |        |
| 28 | Business development                                                      | 5,657  |        |      | 4,943  |      |        | 3,762   |    |        |
| 29 | Card Member services                                                      | 3,968  |        |      | 2,959  |      |        | 1,993   |    |        |
| 30 | Marketing                                                                 | 5,213  |        |      | 5,458  |      |        | 5,291   |    |        |
| 31 | Salaries and employee benefits                                            | 8,067  |        |      | 7,252  |      |        | 6,240   |    |        |
| 32 | Other, net                                                                | 6,807  |        |      | 6,481  |      |        | 4,817   |    |        |
| 33 | Total expenses                                                            | 45,079 |        |      | 41,095 |      |        | 33,110  |    |        |
| 34 | Pretax income                                                             | 10,513 |        |      | 9,585  |      |        | 10,689  |    |        |
| 35 | Income tax provision                                                      | 2,139  |        |      | 2,071  |      |        | 2,629   |    |        |
| 36 | Net income                                                                | $      | 8,374  |      |        | $    | 7,514  |         | $  | 8,060  |
| 37 | Earnings per Common Share - (Note 21)(a)                                  |        |        |      |        |      |        |         |    |        |
| 38 | Basic                                                                     | $      | 11.23  |      |        | $    | 9.86   |         | $  | 10.04  |
| 39 | Diluted                                                                   | $      | 11.21  |      |        | $    | 9.85   |         | $  | 10.02  |
| 40 | Average common shares outstanding for earnings per common share:          |        |        |      |        |      |        |         |    |        |
| 41 | Basic                                                                     |        |        |      | 751    |      |        | 789     |    |        |
| 42 | Diluted                                                                   |        |        |      | 752    |      |        | 790     |    |        |
(a)Represents net income less (i) earnings allocated to participating share awards of $64 million, $57 million and $56 million for the years ended December 31, 2023, 2022 and 2021, respectively, (ii) dividends on preferred shares of $58 million, $57 million and $71 million for the years ended December 31, 2023, 2022 and 2021, respectively, and (iii) equity-related adjustments of $16 million related to the redemption of preferred shares for the year ended December 31, 2021.

See Notes to Consolidated Financial Statements.

94




, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 86: 
DISCOVER FINANCIAL SERVICES


Consolidated Statements of Income

(dollars in millions, except for share amounts)|    |                                                       |                                  |        |      |        |      |        |        |    |       |
|---:|:------------------------------------------------------|:---------------------------------|:-------|:-----|:-------|:-----|:-------|:-------|:---|:------|
|  1 |                                                       | For the Years Ended December 31, |        |      |        |      |        |        |    |       |
|  2 |                                                       | 2023                             |        | 2022 |        | 2021 |        |        |    |       |
|  3 | Interest income                                       |                                  |        |      |        |      |        |        |    |       |
|  4 | Credit card loans                                     | $                                | 14,438 |      |        | $    | 10,632 |        | $  | 8,717 |
|  5 | Other loans                                           | 2,515                            |        |      | 1,870  |      |        | 1,734  |    |       |
|  6 | Investment securities                                 | 449                              |        |      | 179    |      |        | 182    |    |       |
|  7 | Other interest income                                 | 443                              |        |      | 183    |      |        | 18     |    |       |
|  8 | Total interest income                                 | 17,845                           |        |      | 12,864 |      |        | 10,651 |    |       |
|  9 | Interest expense                                      |                                  |        |      |        |      |        |        |    |       |
| 10 | Deposits                                              | 3,886                            |        |      | 1,257  |      |        | 661    |    |       |
| 11 | Short-term borrowings                                 | 5                                |        |      | 2      |      |        | -      |    |       |
| 12 | Long-term borrowings                                  | 855                              |        |      | 606    |      |        | 473    |    |       |
| 13 | Total interest expense                                | 4,746                            |        |      | 1,865  |      |        | 1,134  |    |       |
| 14 | Net interest income                                   | 13,099                           |        |      | 10,999 |      |        | 9,517  |    |       |
| 15 | Provision for credit losses                           | 6,018                            |        |      | 2,359  |      |        | 218    |    |       |
| 16 | Net interest income after provision for credit losses | 7,081                            |        |      | 8,640  |      |        | 9,299  |    |       |
| 17 | Other income                                          |                                  |        |      |        |      |        |        |    |       |
| 18 | Discount and interchange revenue, net                 | 1,447                            |        |      | 1,380  |      |        | 1,188  |    |       |
| 19 | Protection products revenue                           | 172                              |        |      | 172    |      |        | 165    |    |       |
| 20 | Loan fee income                                       | 763                              |        |      | 632    |      |        | 464    |    |       |
| 21 | Transaction processing revenue                        | 303                              |        |      | 249    |      |        | 227    |    |       |
| 22 | (Losses) gains on equity investments                  | (9)                              |        |      | (214)  |      |        | 424    |    |       |
| 23 | Other income                                          | 85                               |        |      | 75     |      |        | 66     |    |       |
| 24 | Total other income                                    | 2,761                            |        |      | 2,294  |      |        | 2,534  |    |       |
| 25 | Other expense                                         |                                  |        |      |        |      |        |        |    |       |
| 26 | Employee compensation and benefits                    | 2,434                            |        |      | 2,139  |      |        | 1,986  |    |       |
| 27 | Marketing and business development                    | 1,164                            |        |      | 1,035  |      |        | 810    |    |       |
| 28 | Information processing and communications             | 608                              |        |      | 513    |      |        | 500    |    |       |
| 29 | Professional fees                                     | 1,041                            |        |      | 871    |      |        | 797    |    |       |
| 30 | Premises and equipment                                | 89                               |        |      | 118    |      |        | 92     |    |       |
| 31 | Other expense                                         | 680                              |        |      | 540    |      |        | 620    |    |       |
| 32 | Total other expense                                   | 6,016                            |        |      | 5,216  |      |        | 4,805  |    |       |
| 33 | Income before income taxes                            | 3,826                            |        |      | 5,718  |      |        | 7,028  |    |       |
| 34 | Income tax expense                                    | 886                              |        |      | 1,344  |      |        | 1,606  |    |       |
| 35 | Net income                                            | $                                | 2,940  |      |        | $    | 4,374  |        | $  | 5,422 |
| 36 | Net income allocated to common stockholders           | $                                | 2,859  |      |        | $    | 4,286  |        | $  | 5,323 |
| 37 | Basic earnings per common share                       | $                                | 11.27  |      |        | $    | 15.45  |        | $  | 17.75 |
| 38 | Diluted earnings per common share                     | $                                | 11.26  |      |        | $    | 15.44  |        | $  | 17.74 |

See Notes to the Consolidated Financial Statements.

-86-






Question: Evaluate the impact of provisions for credit losses on the overall profitability of American Express and Discover Financial Services from 2021 to 2023.
Answer: For American Express, the provision for credit losses was $(1,419) million in 2021, indicating a net release of credit loss reserves, which positively impacted profitability. However, in 2022, the provision increased to $2,182 million, and further to $4,923 million in 2023. This increase in provisions indicates higher credit risk and potential defaults among card members, which negatively impacted profitability. Despite the increase in provisions, American Express managed to recover its net income in 2023, indicating effective management of credit risk and other operational factors.
For Discover Financial Services, the provision for credit losses was $218 million in 2021, which increased to $2,359 million in 2022, and further to $6,018 million in 2023. The substantial increase in provisions over the three years indicates higher credit risk and potential defaults among borrowers, which significantly impacted profitability. The continuous increase in provisions contributed to the decline in net income from $5,422 million in 2021 to $2,940 million in 2023, highlighting the challenges faced by Discover Financial Services in managing credit risk and maintaining profitability.

Overall, the provisions for credit losses have a more pronounced impact on the profitability of Discover Financial Services compared to American Express. The substantial increase in provisions for Discover Financial Services indicates higher credit risk and potential defaults, which significantly impacted its profitability. In contrast, while American Express also experienced an increase in provisions, it managed to recover its net income in 2023, indicating effective management of credit risk and other operational factors.