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Discover Financial Services Reports Second Quarter Net Income Of $602 Million Or $1.20 Per Diluted Share

Stocks in this article: DFS

Discover Financial Services (NYSE: DFS) today reported net income of $602 million or $1.20 per diluted share for the second quarter of 2013, as compared to $525 million or $0.99 per diluted share for the second quarter of 2012. The company's return on equity was 23%.

Second Quarter Highlights

  • Total loans grew $3.7 billion, or 6%, from the prior year to $61.7 billion.
  • Credit card loans grew $2.3 billion, or 5%, to $49.8 billion and Discover card sales volume increased 4% from the prior year.
  • Credit card loan delinquencies over 30 days past due reached a record low of 1.58%. Credit card net charge-off rate decreased 2 basis points sequentially to 2.34%.
  • Payment Services pretax income was down $71 million from the prior year to a pretax loss of $21 million.

"Discover's strong overall results were driven by profitable growth in Direct Banking and continued improvement in credit offset to a small degree by a loss in Payment Services as we supported Diners franchises in Europe," said David Nelms, chairman and CEO of Discover.

Segment Results:

Direct Banking

Direct Banking pretax income of $1.0 billion in the quarter was up $206 million, or 26%, from the prior year.

Discover card sales volume grew 4% from the prior year to $27.6 billion. Credit card loans ended the quarter at $49.8 billion, up 5% from the prior year.

Total loans ended the quarter at $61.7 billion, up 6% compared to the prior year. Private student loans increased $390 million, or 5%, from the prior year and personal loans increased $652 million, or 22%, from the prior year.

Revenue net of interest expense increased $182 million, up 10% from the prior year due to loan growth, revenue from Discover Home Loans, which was launched in June 2012 after acquiring Home Loan Center assets from Tree.com, and lower funding costs.

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