Discover’s Q2 Profit Falls as Loan Loss Provisions Rise 32% (DFS)


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Credit card issuer Discover Financial Services ( DFS ) on Tuesday posted second quarter earnings that met Wall Street's expectations, but in a reversal of recent trends, its money set aside to cover bad loans rose significantly from last year.

The Riverwoods, IL-based company reported second quarter net income of $532 million, or $1 per share, compared with $593 million, or $1.09 per share, in the year-ago period.

Revenue net of interest expense rose 6% from last year to $1.85 billion.

On average, Wall Street analysts expected a matching profit of $1 per share, on slightly lower revenue of $1.84 billion.

On a sour note, DFS said that provision for loan losses rose 32% from last year to $232 million. Loan loss provisions are funds set aside to cover loans a company doesn't expect to be repaid.

Discover Financial shares fell 75 cents, or -2.3%, in premarket trading Tuesday.

The Bottom Line
Shares of Discover Financial Services ( DFS ) have a 1.22% dividend yield, based on last night's closing stock price of $32.83. The stock has technical support in the $28-$30 price area. If the stock can firm up, we see overhead resistance around the all-time high levels of $34-$35 a share.

Discover Financial Services ( DFS ) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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