Discover Q2 Earnings Fall But Beat Estimates

by Alyssa Oursler | June 19, 2012 11:24 am

A second-quarter earnings report for Discover Financial Services (NYSE:DFS[1]) out Tuesday morning showed a drop in the company’s net income from $600 million to $537 million, or $1 per diluted share, though the figure still exceeded analyst expectations[2] of 95 cents per share.

DFS shares dropped immediately after the bell, but had rebounded to a roughly 1% gain by midday.

Year-over-year revenue was strong, up 6% to $1.8 billion, but was offset by a reserve release of $110 million — the result of a 23-basis-point decline in the reserve rate from the first quarter.

Discover card sales volume jumped 5%, credit card loans were up 4% and total loans, including private student loans and personal loans, increased 9% from the same time last year — a growth of $4.5 billion.

Credit card loan delinquencies and net charge-offs also reached historic lows, at rates of 1.91% and 2.79%, respectively.

Overall, the payment services segment did well, increasing pretax income up $4 million, or 10%, from last year, but pretax income in the direct banking segment was down $63 million from $883 million.

Discover recently has added mortgages, fixed-private-rate student loans and its first major affinity credit card to its offerings.

Endnotes:
  1. DFS: http://studio-5.financialcontent.com/investplace/quote?Symbol=DFS
  2. exceeded analyst expectations: http://www.forbes.com/sites/narrativescience/2012/06/18/forbes-earnings-preview-discover-financial-services-3/

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