NEW YORK CITY (dpa-AFX) - Discover Financial Services (DFS) on Thursday reported a 46 percent surge in profit for the fourth quarter, reflecting improved credit performance and higher card sales volume. Earnings per share beat analysts expectations, while revenues matched their estimates. In addition, the credit card company's board of directors raised its quarterly dividend by 67 percent.
The Riverwoods, Illinois-based company's net income allocated to common stockholders for the fourth quarter was $508 million or $0.95 per share, up from $347 million or $0.64 per share in the year-ago period.
Discover reported net income for the quarter of $513 million, up from $350 million in the same quarter a year ago.
On average, 21 analysts polled by Thomson Reuters expected the company to report earnings of $0.92 per share for the quarter. Analysts' estimates typically exclude special items.
Net revenues for the quarter grew 13 percent to $1.81 billion from $1.60 billion a year ago, and matched analysts' consensus estimate of $1.77 billion.
Net interest income increased 12 percent to $1.26 billion, primarily driven by an increase in loan balances related to the student loan acquisitions, an increase in personal loans, and lower interest expense. Net interest margin was 9.10 percent, down 18 basis points from the prior year.
Total loans increased 17 percent from the prior year to $57.3 billion at the end of the quarter. The company purchased an additional $2.4 billion in private student loans in the quarter. Credit card loans grew 3 percent to $46.6 billion at quarter-end.
David Nelms, chairman and chief executive officer of Discover Financial Services said, 'We are pleased to report another quarter of very strong performance as we generated organic growth in all loan products, had continued improvement in credit and demonstrated solid expense control. Our fourth quarter results, together with our already strong capital levels, allowed us to increase our dividend and execute on our share repurchase program.'
The Direct Banking segment's pre-tax income surged 40 percent from the year-ago period to $776 million, driven by higher Discover card sales volumes and a 17 percent decline in loan-loss provisions to $319 million. The decline in provision for loan losses was driven by lower charge-offs, partially offset by a lower reserve release.
Discover card sales volume increased 8 percent from the prior-year period to $25 billion, helped by growth in spending from both new and existing customers.
The company's smaller segment, Payment Services, reported a 35 percent increase in pre-tax income to $42 million. The growth was driven mainly by an increase in transactions on the PULSE network and higher margins.
Discover Financial's board of directors raised the company's quarterly cash dividend by 67 percent to $0.10 per common share, payable on January 19, 2012, to stockholders of record at the close of business on December 29, 2011.
In Thursday's regular session, DFS is currently trading at $23.60, down $0.22 or 0.92 percent on a volume of 469,181 shares.
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