Discover Financial Services said Tuesday that it plans to close
its home loans business to focus instead on direct banking
accounts, which it says provide greater opportunities for
growth.
"The business is not projected to meet our financial
expectations due to ongoing challenges to our home loans operating
model, so we made the difficult decision to exit," said Carlos
Minetti, Discover's president of consumer banking.
Discover, best known for its consumer credit cards, started
offering home loans in mid-2012. It will accept loans until July 31
in its Louisville, Ky., office. After August, AmeriSave Mortgage
Corp. will process the remaining applications, establish an office
in Louisville and offer jobs to about 125 Discover employees.
Discover's Irvine, Calif. location will stop accepting
applications immediately.
Charges related to exiting the mortgage origination business
will be about four cents a share. As a result of the closure, the
company will offer severance packages to about 460 employees.
In the latest quarter, Illinois-based Discover said its profit
fell from year-ago levels as expenses rose and the company set
aside more money to cover future potential losses in its growing
loan portfolio.
Shares of Discover have declined 11% this year through Tuesday's
close.
Write to Angela Chen at angela.chen@dowjones.com
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