Wed. Nov 13th, 2019

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DFS: Discover Financial Services (NYSE: DFS)

3 min read

Discover Financial Services (NYSE: DFS) newly stated net income of $770.00M or $2.360 for each diluted share for the 3rd-quarter of 2k19, as a contrast to $720.00M or $2.050 for each diluted share for the 3rd-quarter of 2k18. The company’s return on equity for the 3rd-quarter of 2k19 was 26.00 percent.

Segment Results:

Direct Banking

Direct Banking pretax income of $943.00M raised by $20.00M from the previous year driven by higher net interest income, partially offset by a boost in the provision for loan losses and higher operating costs.

Total loans finished the quarter at $92.50B, up 6.0 percent contrast to the previous year. Credit card loans finished the quarter at $74.00B, up 7.0 percent from the previous year. Personal loans raised $51.00M, or 1.0 percent, from the previous year. Private student loans raised $333.00M, or 4.0 percent, year-over-year. The organic student loan portfolio, which excludes purchased loans, raised $727.00M, or 9.0 percent from the previous year.

Net interest income raised $179.00M, or 8.0 percent, from the previous year, driven by loan growth and net interest margin expansion. Net interest margin was 10.430 percent, up 15.0 basis points as compared to the prior year. Card yield was 13.350 percent, a boost of 29 basis points from the prior year mainly driven by prime rate inclines in 2k18 in addition to favorable portfolio mix, partially offset by higher interest charge-offs and recent prime rate declines. Interest cost as a percent of total loans raised 19.0 basis points from the prior year, mainly as a result of higher market rates.

Other income reduced $12.00M, or 3.0 percent, from the previous year, mainly driven by higher rewards costs.

The 30+ day delinquency rate for credit card loans was 2.50 percent, up 18.0 basis points from the previous year and up 16.0 basis points from the previous quarter. The credit card net charge-off rate was 3.32 percent, up 18.0 basis points from the prior year and down 17.0 basis points from the prior quarter. The student loan net charge-off rate, apart from PCI loans, was 0.690 percent, down 50.0 basis points from the prior year and down 4.0 basis points from the previous quarter. The personal loans net charge-off rate of 3.990 percent was down 10.0 basis points from the prior year and down 34.0 basis points from the previous quarter. The higher overall net charge-off rate was mainly because of the seasoning of recent years’ loan growth and supply-driven credit normalization.

Provision for loan losses of $799.00M raised $57.00M from the previous year as higher net charge-offs were slightly offset by a lower reserve build. The reserve build for the 3rd-quarter of 2k19 was $98.00M, contrast to a reserve build of $100.00M in the 3rd-quarter of 2k18.

Payment Services

Payment Services pretax income was $51.00M in the quarter, up $7.00M from the previous year, because of higher revenue driven by transaction volume growth.

Payment Services volume was $62.60B, up 7.0 percent as compared to the previous year. PULSE dollar volume was up 5.0 percent year-over-year, which reflects the impact of strong growth from existing issuers and acquirers, in addition to new issuing and acquiring relationships. Network Partners volume raised by 30.00 percent from the previous year driven by AribaPay.

Share Repurchases

During the 3rd-quarter of 2k19, the company repurchased about 5.10M shares of common stock for $419.00M. Shares of common stock outstanding declined by 1.40 percent from the previous quarter.

 

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