Discover Financial Profit Tops Estimates

(RTTNews) - Discover Financial Services (DFS) Thursday reported an increase in fourth-quarter profit as more people used its cards for payments, with both earnings and revenue topping Wall Street estimates.

"The fourth quarter concluded a strong year for Discover, with record net income for 2013," said David Nelms, chairman and CEO of Discover.

More consumers have opted for Discover loans, including students and those paying for mortgages and home loans. During the quarter, Discover said private student loans were up 5 percent from last year and personal loans climbed 27 percent.

The company's credit card loans climbed 4 percent to $53 billion year-over-year and Discover card sales volumes grew 3 percent.

The Riverwoods, Illinois-based company posted quarterly net income to common stockholders of $588 million or $1.23 per share, compared with $530 million or $1.06 per share last year.

On average, 25 analysts polled by Thomson Reuters estimated earnings of $1.18 per share for the quarter. Analysts' estimates typically exclude special items.

The credit card company's revenue, net of interest expense, rose 6 percent to $2.13 billion for the quarter, while analysts estimated revenue of $2.11 billion.

Net interest income rose 10 percent from last year to $1.57 billion, on loan growth, lower interest expense and higher loan yield. Net interest margin was up 42 basis points to 9.82 percent.

Meanwhile, other income slid 5 percent to $560 million, due to lower direct mortgage related income.

Discover said its delinquency rate for credit card loans over 30 days past due was 1.72 percent, an improvement of 7 basis points from last year. Credit card net charge-off rate was 2.09 percent, down 22 basis points from the prior year.

Provision for loan losses for the quarter declined $18 million to $352 million.

Discover declared a quarterly cash dividend of $0.20 per common share, payable on February 20 to holders of record on February 6.

During the quarter, the company repurchased about 7 million of its common shares for $345 million.

DFS stock closed Thursday at $52.40, down $1.26 or 2.35%, on a volume of 4.8 million shares on the NYSE. In after hours, the stock gained $1.04 or 1.98% at $53.44. In the past year, the stock has traded in the range of $37.24 - $56.20.