That's a 6% year-over-year growth rate for credit card loans, which is better than the growth rates for most other major card lenders. Looking past sequential growth rates because of seasonal declines in the first quarter, here's how other big credit card lenders have fared:
- Bank of America's (BAC) credit card loan balances averaged $91.7 billion during the first quarter, declining from $98.3 billion in the first quarter of 2012
- For JPMorgan Chase (JPM), average credit card balances declined to $123.6 billion in the first quarter from $127.6 billion a year earlier
- U.S. Bancorp (USB) reported first-quarter average credit card loans of $16.5 billion, declining from $16.8 billion a year earlier
- Wells Fargo (WFC) reported first-quarter average credit card loans of $$24.1 billion, increasing 9% from $22.1 billion in the first quarter of 2012
- For Citigroup (C), average card loans increased to $146.2 billion in the first quarter from $141.7 billion in the first quarter of 2012, for a year-over-year growth rate of 3%
- American Express (AXP) reported average loans of $62.8 billion in the first quarter, increasing 3% from $60.7 billion a year earlier
- Capital One's (COF) average portfolio credit card loans increased to $78.4 billion in the first quarter from $61.5 billion a year earlier, however, the company acquired roughly $27 billion in card loans from HSBC last year, and transferred its $7 billion Best Buy card portfolio to held-for-sale in the first quarter. The sale of the Best Buy portfolio to Citigroup is expected to be completed in the third quarter.
Why is Discover's credit card loan growth so important? The biggest reason is that credit card lending is so profitable, because of the higher net interest margins. Discover's first-quarter net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- was 9.39%, compared to 9.40% in the fourth quarter and 9.09% a year earlier. It's not a fair comparison, because of Discover's focus on credit cards, but the Federal Deposit Insurance Corp. reported that the consolidated fourth-quarter net interest margin for all U.S. banks during the fourth quarter was 3.32%.
KBW analyst Sanjay Sakhrani rates Discover "outperform," with a $48 price target, and said in a note to clients late on Tuesday that "following 1Q13 results, we came away incrementally positive on Discover given the solid underlying operating trends and multiple avenues of earnings upside." "While probably not having the longest runway to the upside of our
Interested in more on Discover Financial Services? See TheStreet Ratings' report card for this stock. -- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn