By Dow Jones Business News, October 21, 2013, 04:49:00 PM EDT
By Tess Stynes
Discover Financial Services' ( DFS ) third-quarter earnings fell 6.9% as the company set aside more money to cover
potential loan losses, though the company's credit-card business continued to see growth in loans and a drop in
Shares were down 6.2% at $50.40 in recent after-hours trading Monday. Through the close, the stock is up 39% this
In the latest quarter, Discover recorded a loan-loss provision of $333 million, up from $136 million a year earlier
and from $240 million in the previous quarter. The latest period included a $42 million increase in loan-loss reserves,
while the year-earlier period included a reserve release of $167 million.
Discover, the sixth-largest U.S. credit-card lender, has outpaced larger competitors such as American Express Co.
(AXP) and J.P. Morgan Chase & Co. (JPM) in terms of loan growth.
To augment its credit-card business, Discover has ventured into other areas of consumer lending, including student
loans and mortgages, which the company said helped aid revenue growth in the most recent quarter. In the latest quarter
the company also began offering home-equity loans.
Discover reported a profit of $593 million, or $1.20 a share, down from $637 million, or $1.24 a share, a year
earlier. The year-earlier period included a $26 million gain on sale of a minority investment. Revenue net of interest
expenses increased 2.8% to $2.06 billion thanks to loan growth and lower funding costs.
Analysts polled by Thomson Reuters recently expected earnings of $1.21 a share and revenue of $2.07 billion.
The company ended the quarter with $50.4 billion in credit-card loans, an increase of 4% from a year earlier as sales
volume on its proprietary Discover Card increased 3%. Credit-card delinquencies of more than 30 days were 1.67% compared
with 1.81% a year earlier and a record low of 1.58% during the second quarter.
Total loans rose 5.2% to $62.7 billion from a year earlier. Private student loans increased 5%, while personal loans
were up 26%.
Write to Tess Stynes at email@example.com
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