Credit card company Discover Financial Services (DFS) reported Wednesday a profit for the fourth quarter that declined from last year, reflecting higher loan-loss provisions and lower revenues. Both earnings per share and quarterly revenues missed analysts expectations.
"We delivered solid performance this quarter. For the full year our business model and continued focus on the customer drove receivables growth of 6% and a return on equity of over 20%," Chairman and CEO David Nelms said in a statement.
The Riverwoods, Illinois-based company reported net income allocated to common stockholders of $392 million or $0.87 per share for the fourth quarter, compared to $588 million or $1.23 per share in the prior-year quarter.
Excluding $226 million of non-recurring items. adjusted earnings for the latest quarter was $1.19 per share.
On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $1.30 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues net of interest expense for the quarter declined 4 percent to $2.04 billion from $2.13 billion in the same quarter last year, and missed seventeen Wall Street analysts' consensus estimate of $2.20 billion.
Net interest income increased 7 percent to $1.67 billion from $1.57 billion, primarily driven by loan growth. Net interest margin was down 5 basis points to 9.77 percent from the prior year. The credit card net charge-off rate increased 17 basis points to 2.26 percent from last year.
Total loans increased 6.5 percent from the prior year to $69.9 billion at the end of the quarter. Credit card loans grew 5.6 percent to $56.1 billion at quarter-end.
The company's provision for loan losses for the quarter increased 29 percent to $457 million from $354 million in the year-ago quarter.
The Direct Banking segment's pre-tax income declined 29 percent from the year-ago period to $646 million, driven by a $178 million one-time charge related to the elimination of the credit card rewards forfeiture reserve.
Discover card sales volumes grew 4.5 percent to $30.87 billion, helped by growth in spending from both new and existing customers.
The company's smaller segment, Payment Services, reported a pretax income of $2 million, down $24 million from the prior year primarily due to a $21 million fair value adjustment resulting from classifying Diners Club Italy as held-for-sale. Transaction volume for the segment was up 2 percent to $51.0 billion in the quarter.
DFS closed Wednesday's regular trading session at $60.84, down $0.03 or 0.05% on a volume of 5.61 million shares. The stock lost a further $1.84 or 3.02% in after-hours trading.
For comments and feedback contact: editorial@rttnews.com
Business News