Discover Financial Services (DFS) Tuesday reported a better-than-expected increase in third-quarter profit, helped mostly by growth in card loans.
Results for the quarter were "driven by robust card loan growth, strong revenue growth and near historically low credit performance," said CEO David Nelms in a statement.
A pickup in employment level, low interest rates and some strong consumer confidence have driven up demand for card loans. Discover said its total loans for the quarter grew 7.4 percent from the prior year to $67.4 billion.
Discover, based in Riverwoods, Illinois, posted quarterly net income to common stockholders of $630 million or $1.37 per share, compared with $579 million or $1.20 per share in the year-ago quarter. On average, 22 analysts polled by Thomson Reuters expected earnings of $1.34 per share for the quarter. Analysts' estimates typically exclude special items.
Revenue for the third quarter, net of interest expense, rose 6 percent to $2.19 billion from $2.06 billion a year ago. Fifteen analysts had a consensus revenue estimate of $2.20 billion for the quarter.
Net interest income for the quarter increased 9 percent year-over-year to $1.64 billion. Net interest margin was 9.79 percent, up 14 basis points from the prior year. Other income was almost flat at $552 million.
Provision for loan losses for the quarter increased by $23 million from last year to $356 million.
Net charge-off rate for credit card loans increased 11 basis points from last year and the delinquency rate for loans over 30 days past due increased 4 basis points.
On Thursday, Capital One Financial Corp (COF) reported a decline in third-quarter profit, hurt by loan-loss provision and a marginal drop in revenue.
DFS stock closed Tuesday at $64.38, up $1.68 or 2.68%, on a volume of 2.8 million shares on the NYSE. In after hours, the stock dropped $0.28 or 0.43%, trading at $64.10.
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