DFS Discover Financial Services

By Lisa Beilfuss and Robin Sidel 

Discover Financial Services topped first-quarter expectations as the lender made good on its vow to accelerate loan growth.

Shares in the company, down 11% over the past 12 months through Tuesday's close, gained 1.2% in after-hours trading.

Chief Executive David Nelms promised earlier this year to boost credit-card lending over the course of 2016, targeting a 4% to 6% increase in total loans after attributing a disappointing end of the year to lackluster retail sales and lower gas prices.

In the latest quarter, total loans grew at the low end of that target range to $70.3 billion, up from a 3.5% pace in the fourth quarter. A 4% increase in credit card loans -- which account for roughly 80% of Discover's loan portfolio -- drove the improvement. The Riverwoods, Ill.-based company has also been working to beef up other loan segments. It said personal loans jumped 9% while student loans rose 3% during the period.

"We made progress on our priorities this quarter, most notably accelerating loan growth into our target range," said Mr. Nelms.

The credit-card loan growth was about evenly split between new accounts and existing accounts, Chief Financial Officer Mark Graf said in a conference call with analysts. The company also saw some renewed activity in accounts that had been dormant.

Discover targets so-called "prime" consumers, meaning those that have good credit histories.

Credit-card delinquency and default rates remained at low levels. Mr. Nelms said the company will "look for places where we can appropriately increase credit lines or extend credit."

In all, Discover reported a profit of $575 million, down from $586 million a year earlier. On a per-share basis, earnings rose to $1.35 a share from $1.28, thanks to a lower share count. The company repurchased about 9 million shares during the quarter.

Mr. Nelms said Tuesday that Discover remains focused on effectively deploying capital.

Revenue net of interest edged 2.4% higher to $2.22 billion.

Analysts projected $1.29 in per-share profit and $2.17 billion in revenue, according to Thomson Reuters.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com and Robin Sidel at robin.sidel@wsj.com

(END) Dow Jones Newswires

April 19, 2016 19:33 ET (23:33 GMT)

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