Recently, in an investor conference,
Discover Financial Services
) announced its plans to enter the checking and home equity
businesses in 2013. Additionally, the company will launch a new
banking platform during the year and expand the PULSE network to
include all debit transactions.
DFS also plans to expand its market presence through product
launches, extension of distribution channels and partnerships.
Further, it will continue expanding card acceptances within the
U.S. as well as internationally.
Discover Financial has set a long-term growth rate target of
2%-5% for card receivables, 5%-10% for other consumer lending and
over 10% for payment volume. Further, the company wants to
achieve return on equity of 15% and Tier 1 common ratio of about
9.5% in the long term.
DFS believes that its expertise in the credit card and savings
business will facilitate the launch of the checking business.
Similarly, proficiency in the personal and home loans businesses
will help the company foray into the home equity business.
Discover Financial entered the home loan business in 2012,
following the acquisition of Home Loan Center from
), and has already established a strong foothold in the
Considering that about 80% of Discover Financial's clients are
home owners and the home equity loan business witnessed initial
signs of recovery in 2012, the company expects substantial demand
for home equity loans. DFS intends to offer secured, fixed-rate
home equity loans with values between $25,000 and $100,000.
So far in 2013, Discover Financial has already launched
Discover Cashback CheckingSM - a checking account offering
cashback rewards - and Discover it - a new credit card that
charges no annual fee, over-limit fee, pay-by-phone fee, foreign
transaction fee or any fee on the first late payment.
Further, the company has announced affiliations with Cadence
Bank and Interswitch Limited to boost card acceptances and
transaction volume. Discover Financial also collaborated with
) to launch the Facebook Gift card program.
DFS currently carries a Zacks Rank #3 (Hold). Another company
worth considering in the financial sector is
Encore Capital Group, Inc.
), which carries a Zacks Rank #2 (Buy).
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