WASHINGTON (dpa-AFX) - Credit card lender Discover Financial Services (DFS), Tuesday reported a decline in first-quarter profit, hurt mainly by loan-loss provisions, while revenues climbed as more customers used its cards for payments. However, earnings for the quarter topped Wall Street estimates, while revenue fell short of expectations.
More consumers have opted for Discover loans, including students and those paying for mortgages and home loans, coming as it does amid some expansion in the company and customers' credit rating improves.
The quarter saw strong loan growth, good credit performance and growth in other lending products, said Discover CEO David Nelms.
During the quarter, Discover said private student loans were up 5 percent from last year and personal loans jumped 27 percent.
The company's loans for the quarter grew 6 percent from last year to $63.9 billion, and Discover Card sales volume climbed 3 percent.
Discover, based in Riverwoods, Illinois, posted quarterly net income to common stockholders of $618 million or $1.31 per share, compared with $659 million or $1.33 per share last year. On average, 25 analysts polled by Thomson Reuters estimated earnings of $1.25 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues for the first quarter, net of interest expense, climbed 4 percent to $2.08 billion from $1.99 billion last year. Nineteen analysts had a consensus revenue estimate of $2.11 billion for the quarter.
Net interest income for the quarter climbed to $1.56 billion from $1.41 billion a year ago, while other income dropped to $515 million from $582 million.
Results for the quarter were largely offset by loan-loss provision that climbed to $272 million from $159 million in the prior-year quarter.
Following the Federal Reserve's stress tests, Discover recently approved a new $3.2 billion share buy back plan and boosted quarterly dividend to $0.24 a share from $0.20.
Last Wednesday, American Express Co (AXP) reported a 12 percent increase in profit for the first quarter, on higher card spending by its affluent customers. Another card lender, Capital One Financial Corp (COF), reported a higher quarterly profit, due to lower loss provisions even as domestic card business and consumer banking revenue came under pressure.
DFS stock closed Tuesday at $56.67, down $0.10 or 0.18%, on a volume of 3.76 million shares on the NYSE. In after hours, the stock dropped $0.67 or 1.18% at $56.00. In the past year, the stock has traded in the range of $43.53 - 60.00.
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