Financial Services
Discover Beats Profit Expectation
TSC Staff
06/26/08 - 10:08 AM EDT
Discover Financial Services(DFS Quote - Cramer on DFS - Stock Picks) on Thursday beat Wall Street's second-quarter expectations with a slight rise in net profit from the year ago quarter.
The Riverwoods, Ill.-based credit card company reported net income of $234 million, or 48 cents a share, vs. $209 million, or 44 cents a share, in the year-ago period.
Excluding results from its Goldfish credit card business in the U.K., which it sold to Barclays(BCS Quote - Cramer on BCS - Stock Picks) in the second quarter, the company earned $202 million, or 42 cents a share. Analysts polled by Thomson Reuters had forecasted a profit of 37 cents a share.
"Despite the challenging economy, Discover delivered solid results this quarter," CEO David Nelms said in a company statement. "We grew managed loans and revenues within our U.S. card segment and maintained strong credit quality. We are also very pleased with the performance of our third-party payments segment, which delivered record network volume of $29 billion, an increase of 33% from last year."
Despite jettisoning Goldfish, Discover struck a deal for Diner's Club International, which it expects to close in July. Nelms said the acquisition will help Discover accelerate growth in its payments network revenues.
The company reported its managed net principal charge-off rate increased to 4.99% from 3.97% in the year-ago period and 4.33% in the first quarter. The company's provision for loan losses increased 31% in the quarter.
Rival American Express(AXP Quote - Cramer on AXP - Stock Picks) offered a dim near-term outlook on Wednesday, in a statement after it settled an antitrust lawsuit with MasterCard(MA Quote - Cramer on MA - Stock Picks) over its alleged conspiracy to keep it out of the bank-issued credit card business.