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Discover Financial Services Earnings: Record Results May Be Just the Beginning

A dive into the latest results from Discover Financial Services shows investors that while it delivered record earnings in the second quarter of this year, it could be poised for even greater success into the future.

Powerful results

In the second quarter, Discover announced its earnings per share stood at $1.35, which represented a 13% gain over the $1.20 posted in the second quarter of last year and marked a record quarter for the firm. It also topped the $1.31 expected results from analysts.

Source: Company Investor Relations.

Not only does it consistently earn at a higher rate than Bank of America's credit card business, but it has also kept its margins incredibly stable over the last year.

In fact, for the bank as a whole, Discover watched its net interest margin expand from 9.4% to 9.8%. This is all while banks in total saw their NIM on loans fall by 0.1 percentage point year over year.

The reality that Discover could buck the negative industry trends and outpace its peers in the expansion of its margins is undoubtedly an encouraging result.

Other loans skyrocketing

The final bit of good news from Discover came from the fact its personal loans have grown by a staggering 26% over the last year to stand at $4.6 billion. While this segment represents just a small fraction of what Discover is as a whole -- it has more than $65 billion of total loans -- this growth is a promising sign that its expansion into the lending arena outside of just credit cards is going incredibly well.

It's too early to tell exactly what this could mean for Discover as a whole, but it could add nearly $1 billion in loans without operating a single branch, which could mean its future is incredibly bright.

The Foolish bottom line

One quarter's result almost never represents a reason to buy a stake in a company, and Discover's latest quarter is no exception to that rule. Yet the company delivered impressive results, and the expansion of its profits plus the growth of its business are encouraging signs that point to a bright future.

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The article Discover Financial Services Earnings: Record Results May Be Just the Beginning originally appeared on Fool.com.

Patrick Morris owns shares of Bank of America and Discover Financial Services. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America and Discover Financial Services. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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


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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