Discover 2015 Annual Report Download - page 99
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-83-
12-month period, also are considered to be rate sensitive. For these fixed-rate liabilities, earnings sensitivity is measured
from the expected maturity date.
Assuming an immediate 100 basis point increase in the interest rates affecting all interest rate sensitive assets and
liabilities at December 31, 2015, we estimate that net interest income over the following 12-month period would
increase by approximately $217 million, or 3%. Assuming an immediate 100 basis point increase in the interest rates
affecting all interest rate sensitive assets and liabilities at December 31, 2014, we estimated that net interest income
over the following 12-month period would increase by approximately $167 million, or 2%. We have not provided an
estimate of any impact on net interest income of a decrease in interest rates as many of our interest rate sensitive assets
and liabilities are tied to interest rates that are already at or near their historical minimum levels (i.e., Prime and LIBOR)
and, therefore, could not materially decrease further assuming U.S. market interest rates continue to remain above zero
percent. Sustained negative interest rates for an economy the size and complexity of the United States would likely lead
to broad macroeconomic impacts that are difficult to foresee. While there is a possibility that U.S market interest rates
could fall below zero percent, this has not historically occurred in the United States. Net interest income sensitivity
requires assumptions to be made regarding market conditions, consumer behavior, and the overall growth and
composition of the balance sheet. These assumptions are inherently uncertain and, as a result, actual earnings may
differ from the simulated earnings presented above. Our actual earnings are dependent on multiple factors including,
but not limited to, the direction and timing of changes in interest rates the movement of short-term versus long-term
rates, balance sheet design, competitor actions which may affect pricing decisions in our loans and deposits, and
strategic actions undertaken by management.