Discover Posts $261 Million Profit, Exceeding Most Estimates
Discover Financial Services CEO David Nelms
Tim Boyle/Bloomberg
“Discover card spending continued to grow nicely this quarter and our third-party credit and debit network businesses achieved record transaction volumes,” Nelms said.
“Discover card spending continued to grow nicely this quarter and our third-party credit and debit network businesses achieved record transaction volumes,” Nelms said. Photographer: Tim Boyle/Bloomberg
Discover Financial Services, the payments processor whose stock has outperformed its three larger U.S. rivals this year, advanced 3.8 percent after posting third- quarter profit that exceeded most estimates.
Net income for the three months ended Aug. 31 was $260.6 million, or 47 cents a share, compared with $577.5 million in the same period a year earlier, which included a $287 million gain from a legal settlement, the Riverwoods, Illinois-based lender said today in a statement. The average estimate of 16 analysts surveyed by Bloomberg was 38 cents.
“Discover card spending continued to grow nicely this quarter and our third-party credit and debit network businesses achieved record transaction volumes,” Chief Executive Officer David Nelms said in the statement.
Nelms, 49, is positioning his company to compete worldwide with Visa Inc., MasterCard Inc. and New York-based American Express Co. He’s integrating Discover’s namesake network with its Pulse and Diners Club brands so customers’ cards can be accepted on all three.
The company’s Payment Services division processed a record $39 billion in transactions as Discover card sales volume rose 5 percent on an annualized basis to $24 billion. Discover released $187 million from an account to cover future loan losses as write-offs for loans deemed uncollectible fell $101.5 million to $899.5 million from $1 billion in the second quarter.
Credit Improvement
“The ongoing improvement in the outlook for credit performance of our card members has enabled us to accelerate investments for long-term profitable growth,” Nelms said.
The company last week agreed to buy Citigroup Inc.’s Student Loan Corp. in a $600 million deal that would make Discover the third-biggest U.S. provider of private student loans.
Nelms said Discover now has agreements with the top 100 companies that set up U.S. merchants to accept electronic payments. Those firms, or “merchant acquirers,” represent more than 97 percent of the nation’s credit-card purchase volume.
“It wasn’t that many years ago that we had none of the top 100 and we were signing every merchant in the country ourselves,” Nelms said in a telephone interview. “Now we have the whole industry able to offer Discover as part of their package.”
Discover rose 3.8 percent to $16.16 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have climbed 9.9 percent this year. San Francisco-based Visa, the world’s biggest processor, dropped 20 percent and No. 2 MasterCard, based in Purchase, New York, declined 15 percent. Amex, the third-largest network and the biggest U.S. credit-card issuer by purchases, gained 6.4 percent.
To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net
To contact the editor responsible for this story: Alec McCabe in New York at amccabe@bloomberg.net
Rate this Page