Discover Financial Services Reports Third Quarter Net Income Of $627 Million Or $1.21 Per Diluted Share

Discover Financial Services (NYSE: DFS) today reported net income of $627 million or $1.21 per diluted share for the third quarter of 2012, as compared to $649 million or $1.18 per share for the third quarter of 2011. The company’s return on equity was 28%. Strong year-over-year revenue growth and lower charge-offs were offset by lower loan loss reserve releases and increased legal expense due to accruals associated with the recently concluded Federal Deposit Insurance Corporation (FDIC) and Consumer Financial Protection Bureau (CFPB) regulatory matter.

Third Quarter Highlights

• Total loans grew $5.1 billion, or 9%, from the prior year to $59.2 billion.
• Credit card loans grew $1.9 billion, or 4%, to $48.1 billion and Discover card sales volume increased 4% 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 1.81% and a net charge-off rate of 2.43%.
• Payment Services pretax income was up 31% from the prior year to $49 million. Transaction volume for the segment was $50.3 billion in the quarter, an increase of 13% from the prior year.

“Our business segments demonstrated solid performance during the quarter,” said David Nelms, chairman and CEO of Discover. “Card sales and receivables grew in a challenging environment while credit quality continued to improve. We successfully launched Discover Home Loans in June, which expanded our direct banking product suite. In payments, we signed agreements with PayPal, Industrial and Commercial Bank of China, and most recently Russian Standard Bank to enhance our global presence and leverage our existing infrastructure.”

Segment Results:

Direct Banking

Direct Banking pretax income of $963 million in the quarter was down $46 million, or 5%, from the prior year.

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