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Discover Financial Services Message Board

  • bluecheese4u bluecheese4u Jun 19, 2012 9:01 AM Flag

    Discover Financial Services Reports 2Q Net Income of $537 Million or $1.00 Per

    Discover Financial Services Reports Second Quarter Net Income of $537 Million or $1.00 Per Diluted Share

    Revenues Increased 6% Y-O-Y to $1.8 Billion

    RIVERWOODS, Ill.--(BUSINESS WIRE)--Jun. 19, 2012-- Discover Financial Services (NYSE: DFS) today reported net income of $537 million or $1.00 per diluted share for the second quarter of 2012, as compared to $600 million or $1.09 per share for the second quarter of 2011. Strong year-over-year revenue growth was offset by lower reserve releases. The company’s return on equity was 24%.

    Second Quarter Highlights
    Total loans grew $4.5 billion, or 9%, from the prior year to $57.1 billion.
    Credit card loans grew $1.6 billion to $46.6 billion and Discover card sales volume increased 5% from the prior year.
    Credit card loan delinquencies and net charge-offs reached historic lows with a delinquency rate for loans over 30 days past due of 1.91% and a net charge-off rate of 2.79%.
    Payment Services pretax income was up 10% from the prior year to $47 million. Transaction volume for the segment was $51.4 billion in the quarter, an increase of 12% from the prior year.

    "Our results this quarter reflect outstanding fundamental performance in both of our business segments and continued improvement in credit performance," said David Nelms, chairman and chief executive officer of Discover. "In addition to the strong financial results for the quarter, I am excited about our recent expansion into three new products. Discover now offers mortgages through the recently acquired Home Loan Center platform, a fixed rate private student loan product to better meet the tuition funding needs of our customers and our first major affinity credit card. We believe these new products lay a foundation for additional revenue and asset growth in the future."

    Segment Results:

    Direct Banking

    Direct Banking pretax income of $820 million in the quarter was down $63 million, or 7%, from the prior year.

    Discover card sales volume grew 5% from the prior year to $26.1 billion. Credit card loans ended the quarter at $46.6 billion, up 4%, or $1.6 billion, from the prior year.

    Total loans ended the quarter at $57.1 billion, up $4.5 billion, or 9%, compared to the prior year. Private student loans increased $2.9 billion, including the acquisition of a $2.4 billion student loan portfolio in the fourth quarter of 2011. Personal loans increased $703 million from the prior year.

    Net interest margin was 9.31%, up 16 basis points from the prior year and 28 basis points from the prior quarter. The increase in net interest margin from the prior year reflects decreased funding costs partially offset by lower credit card yield. Credit card yield was 12.35%, a decrease of 22 basis points from the prior year and an increase of 14 basis points from the prior quarter. The decline in credit card yield from the prior year reflects a decline in higher rate balances and an increase in promotional rate balances, partially offset by lower interest charge-offs. Interest expense as a percent of total loans decreased 50 basis points from the prior year and 5 basis points from the prior quarter as the company continued to take advantage of available low rate funding.

    Net interest income increased $122 million, or 10%, from the prior year, benefiting from loan growth and lower interest expense. This was partially offset by a decline in credit card and student loan yields.

    The delinquency rate for

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