Seeking Alpha

Earnings miss good excuse for Discover investors to lighten up

  • Direct banking pretax income of $918M off 6% from a year ago.
  • Discover card sales volume of $28B up 3% Y/Y. Credit card loans of $50.4B up 4%. Total loans of $62.7B up 5%, with private student loans of $387M up 5%, personal loans of $830M up 26%.
  • Net interest margin of 9.65% gains 26 basis points from a year ago thanks to lower funding costs offsetting lower loan yields. Net interest income of $122M up 9%.
  • Delinquency rate for credit cards over 30 days pas due falls 16 bps to 1.67%, but is up 9 bps from Q2. Credit card net charge-offs of 2.05% is off 29 bps from a year ago and from Q2. Student loan charge-offs of  1.33% is up 50 bps from a year ago.
  • Loan loss reserve build of $42M due to lower expected recoveries on aged charge-offs and loan growth. Last year's Q3 saw a provision release of $167M.
  • Payment services income of $28M Is off $20M from a year ago.
  • About 7M shares repurchased during Q for $350M, cutting the float by 1%.
  • Conference call at 5 ET.
  • Q3 results, press release.
  • DFS -4.2% AH.
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