By Saabira Chaudhuri
Discover Financial Services' (DFS) fiscal first-quarter profit
rose 3.5% even as credit-loss provisions rose from the year
earlier, as the credit-card company reported higher revenue and
lower credit card delinquencies.
Shares rose 2.4% to $44.65 in recent premarket trading as
per-share earnings beat Street views.
Discover, both a lender to cardholders and a processor of
transactions, had posted stronger results in recent quarters amid
improving credit trends. But the funds the company has set aside
for loan losses has risen year-over-year for about a year, as it
did again did in the latest quarter.
Overall, Discover reported a profit of $673 million, or $1.33 a
share, versus $650 million, or $1.21 a share, a year ago. Revenue
net of interest expense rose 10% to $1.99 billion.
Analysts polled by Thomson Reuters expected earnings of $1.13 a
share on revenue of $2 billion.
The delinquency rate for credit card loans over 30 days past due
declined to 1.77% from 2.10% a year ago and 1.79% in the prior
quarter.
Provisions for loan losses were $159 million, from $84 million a
year ago and $370 million in the prior quarter.
Net charge-offs, or loans the company doesn't expect to collect,
were 2.08%, from 2.52% a year earlier and 2.06% in the prior
quarter.
Total loans grew $3.7 billion, or about 7%, from the prior year
to $60.4 billion.
The net interest margin was 9.39%, up 30 basis points from the
prior year, reflecting decreased funding costs partially offset by
lower loan yield. Meanwhile, credit card yield was 11.94%, a
decrease of 27 basis points from the prior year.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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