Other income increased $25 million, or 5%, from the prior year primarily due to revenue from Discover Home Loans, which was launched in June 2012 after acquiring Home Loan Center assets from Tree.com, and higher interchange revenue. Increases in other income were partially offset by higher customer rewards.
Expenses were up $178 million, or 29%, from the prior year. The increase was primarily due to a $94 million year-over-year increase in expenses for legal reserves associated primarily with the FDIC and CFPB matter. Excluding the change in legal reserves, expenses increased 14% from the prior year primarily due to the Home Loan Center acquisition, higher marketing expenses and higher headcount.
Payment Services pretax income was $49 million in the quarter, up $11 million, or 31%, from the prior year. Revenue increased $17 million, primarily driven by an increase in higher margin point-of-sale transactions on the PULSE network. Expenses were up $6 million from the prior year.
Payment Services dollar volume was $50.3 billion for the third quarter of 2012, up 13% from the prior year, driven by higher PULSE and third-party issuer volume.
In the third quarter of 2012, the company repurchased approximately 10 million shares of common stock for $350 million. Shares outstanding declined by 1.9% from prior quarter.
Conference Call and Webcast Information
The company will host a conference call to discuss its third quarter results on Thursday, September 27, 2012, at 9:00 am. Central time. Interested parties can listen to the conference call via a live audio webcast at
Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the
America's cash rewards pioneer, and offers home loans, private student loans, personal loans, online savings accounts, certificates of deposit and money market accounts through its
direct banking business
, with millions of merchant and cash access locations;
, one of the nation's leading ATM/debit networks; and
Diners Club International
, a global payments network with acceptance in more than 185 countries and territories. For more information, visit
A financial summary follows. Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the financial supplement filed as Exhibit 99.2 to the company’s Current Report on Form 8-K filed today with the Securities and Exchange Commission (“SEC”). Both the earnings release and the financial supplement are available online at the SEC’s website (
) and the company’s website (
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which speak to our expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Such statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this press release, and there is no undertaking to update or revise them as more information becomes available.