Updated from 12:23 p.m. EDTDiscover Financial ( DFS) shares initially rallied, but more recently were falling 8% on Thursday, after posting a first-quarter jump in profit and cutting its dividend to conserve capital. The Riverwoods, Ill.-based credit card company made $120.4 million, or 25 cents a share, compared to $81.2 million, or 17 cents a share, in the year earlier period. Analysts on average predicted the company would record a loss of 16 cents a share, according to Thomson Reuters. Discover cut its dividend by two-thirds to 2 cents a share. The action will save the company $80 million in capital a year, it said. Shares recently were down 8% to $6.66. The quarterly results included an after-tax gain of $297 million related to prior litigation settlements with Visa ( V) and MasterCard ( MA). Discover, along with American Express ( AXP), had alleged that the two larger rivals had conspired to create a monopoly on the bank-issued credit card space. Discover has had larger gains in previous quarters. "Given the unprecedented economic downturn, we continue to take steps to strengthen our balance sheet, including increasing our reserves," chairman and CEO David Nelms said in a statement. "Out of an abundance of caution, we are also reducing our quarterly dividend to enhance our already strong capital position." Discover received $1.2 billion in capital through the Troubled Asset Relief Program last week. Managed loans, which includes both securitized loans and those on the company's balance sheet, totaled $51 billion, unchanged from the fourth quarter of last year and up 7% from the year-earlier quarter. Still, the company was forced to add a $707 million provision to reserves as more customers lost their jobs in the quarter. Discover said that customers that were more than 30 days late on paying their accounts rose 69 basis points from the prior quarter to 5.25% on a managed basis. Charge-offs rose 100 basis points to 6.48%. Approximately $3 billion of loans related to maturing securitizations were refinanced and put on the balance sheet, it said.