Discover Financial Is Cheap And Has Great Opportunities
Discover Financial Services: Set For Growth With New Strategies And Network Partnerships
Bishop Research and Analytics • 22 Comments
Bishop Research and Analytics • 22 Comments
Tue, Jul. 19, 5:36 PM
Tue, Jul. 19, 4:29 PM
- Q2 net income (after backing out a tax benefit) of $572M or $1.36 per share vs. $599M and $1.33 one year ago.
- Total loans up 4% Y/Y to $71.9B. Credit card loans up 4% to $57.2B. Card sales volume up 2%.
- Total net charge-off rate excluding PCI loans up 11 bps to 2.27%; total delinquency rate over 30 days past due up 11 bps to 1.60%.
- Direct Banking pretax income of $868M down $46M Y/Y, wit higher net interest income and lower operating expenses more than offset by higher provisions and lower other income (increased promotional awards and discontinuation of mortgage operation). NIM of 9.95% up 32 bps. Provisions of $441M up $105M from a year ago. Reserve build of $27M driven mostly by loan growth; Q2 a year ago had a reserve release of $41M. Expenses down 2%.
- Payment Services pretax income of $30M up $2M Y/Y.
- 7.8M shares repurchased during quarter for $425M, cutting the float by 1.9%.
- Conference call at 5 ET
- Previously: Discover Financial Services misses by $0.06, misses on revenue (July 19)
- DFS flat after hours
Tue, Jul. 19, 4:21 PM
Mon, Jul. 18, 5:35 PM
Thu, Jul. 14, 4:45 PM| Thu, Jul. 14, 4:45 PM | 6 Comments
Thu, Jun. 23, 4:51 PM
- Ally Financial (NYSE:ALLY): Actual end of 2015 CET1 ratio of 9.2%, Q1 2018 CET1 ratio under severely adverse scenario of 6.1%, minimum 6.1%.
- American Express (NYSE:AXP): Actual 12.4%, Q1 2018 12.3%, minimum 11.4%.
- Bank of America (NYSE:BAC): Actual 11.6%, Q1 2018 8.1%, minimum 8.1%.
- BNY Mellon (NYSE:BK): Actual 11.5%, Q1 2018 11.2%; minimum 10.5%.
- BB&T (NYSE:BBT): 10.3%, 6.9%, 6.9%
- BBVA Compass (NYSE:BBVA): 10.7%, 6.5%, 6.5%.
- BMO Financial (NYSE:BMO): 11.9%, 5.9%, 5.9%.
- Capital One (NYSE:COF): 11.1%, 8.2%, 8.2%.
- Citigroup (NYSE:C): 15.3%, 9.2%, 9.2%.
- Citizens Financial (NYSE:CFG): 11.7%, 8.8%, 8.8%.
- Comerica (NYSE:CMA): 10.5%, 8.3%, 8.3%.
- Discover (NYSE:DFS): 13.9%, 12.4%, 11.9%.
- Fifth Third (NASDAQ:FITB): 9.8%, 6.8%, 6.8%.
- Goldman Sachs (NYSE:GS): 13.6%, 10.2%, 8.4%.
- HSBC N.A. (NYSE:HSBC): 15.7%, 9.1%, 9.1%.
- Huntington Bancshares (NASDAQ:HBAN): 9.8%, 5%, 5%.
- JPMorgan (NYSE:JPM): 12%, 8.3%, 8.3%.
- KeyCorp (NYSE:KEY): 10.9%, 6.4%, 6.4%.
- M&T (NYSE:MTB): 11.1%, 6.9%, 6.9%.
- Morgan Stanley (NYSE:MS): 16.4%, 10%, 9.1%.
- Northern Trust (NASDAQ:NTRS): 10.8%, 9.6%, 9.6%.
- PNC Financial (NYSE:PNC): 10.6%, 7.6%, 7.6%.
- Regions (NYSE:RF): 10.9%, 7.3%, 7.3%.
- Santander Holdings (NYSE:SAN): 12%, 11.8%, 11.8%
- State Street (NYSE:STT): 13%, 9.6%, 9.6%
- SunTrust (NYSE:STI): 10%, 7.5%, 7.5%.
- TD Group (NYSE:TD): 13.1%, 8.4%, 8.4%.
- U.S. Bancorp (NYSE:USB): 9.6%, 7.5%, 7.5%.
- Wells Fargo (NYSE:WFC): 11.1%, 7.2%, 7.2%.
- Zions (NASDAQ:ZION): 12.2%, 6.6%, 6.6%.
- Previously: All 33 banks pass this year's stress tests (June 23)
Tue, Jun. 14, 12:20 PM
- In conjunction with CFO Brian Doubles' appearance at a conference this morning, the company said it expects a 20-30 basis point increase in net charge off rates over the next year.
- BTIG's Mark Palmer notes Doubles says Synchrony (SYF -14.3%) continues to see the credit environment as "benign," though management anticipates "softening" in customers' ability to pay off balances. Palmer also says credit metrics currently are at unusually low (good) levels, and "normalization" should be expected at this point in the cycle.
- There's also a positive catalyst on the horizon in the CCAR results, at which Palmer expects the initiation of buybacks and a dividend.
- He reiterates his Buy rating, with $42 price target (60% upside) based off of 12.5x 2018 estimated EPS of $3.33.
- Discover (DFS -3.1%), Capital One (COF -6%), American Express (AXP -3.9%), OneMain Holdings (OMF -7.3%), Santander Consumer (SC -5.5%), Ally Financial (ALLY -2.9%)
Tue, Jun. 14, 9:59 AM
- Synchrony Financial is down more than 8% after warning of an increase in charge-off rates over the next year.
- Capital One (COF -2.8%), Discover (DFS -1.1%), American Express (AXP -1.6%).
- Releasing its monthly statistics, Discover says its net principal charge-off rate in May was 2.4%, down 10 basis points from April, but up from the cycle low of 1.9% from last July. The delinquency over the last 30 days was 1.6%, flat from April and from last summer.
Fri, Jun. 10, 6:15 PM
- Wal-Mart (NYSE:WMT) says it will stop accepting Visa (NYSE:V) cards in Canadian stores after failing to agree on terms with the credit card company.
- The move is the latest in a years-long battle between the two companies over fees and the right to steer customers to certain types of payments.
- Visa is the largest payments network in Canada, with 50.6M cards in circulation and $232.6B worth of transactions last year.
- WMT, which has 405 stores in Canada, says it will continue to accept MasterCard (NYSE:MA), American Express (NYSE:AXP), Discover (NYSE:DFS) and other cards.
Wed, Jun. 1, 9:11 AM
- Ahead of this month's release of the stress test and CCAR results, BMO Capital recommends going long Discover (NYSE:DFS) and Morgan Stanley (NYSE:MS), while shorting Comerica (NYSE:CMA) and Fifth Third Bancorp (NASDAQ:FITB).
- A check of the stress test criteria has BMO preferring those lenders with less asset sensitivity, limited exposure to capital markets, limited overseas exposure, low expectations for payout boosts, and high starting capital ratios.
- For those expecting the Fed to surprise with a June rate hike, buy SunTrust (NYSE:STI) against shorts in Comerica and Fifth Third.
Mon, May 23, 12:39 PM
- "Politics is now a topic in every client discussion," say David Kostin and team, and the nature of today's electorate nearly assures a close race, even though prediction markets currently assign a high probability of a Clinton victory.
- When uncertainty rises, consumer staples (NYSEARCA:XLP) typically outperforms, while tech (NYSEARCA:XLK) lags.
- Getting down to names, with protectionism and tax policy two key areas of debate, buy those stocks with high U.S. sales and high effective tax rates, and avoid those with high foreign sales and low tax rates.
- High U.S. sales and high tax rates (buy): Cardinal Health (NYSE:CAH), Fidelity National (NYSE:FIS), Discover (NYSE:DFS), AmerisourceBergen (NYSE:ABC), Schwab (NYSE:SCHW), ADP (NASDAQ:ADP), Chipotle (NYSE:CMG), Reynolds America (NYSE:RAI), Express Scripts (NASDAQ:ESRX), Alliance Data (NYSE:ADS), Fiserv (NASDAQ:FISV), Paychex (NASDAQ:PAYX), Whole Foods (NASDAQ:WFM), Akamai (NASDAQ:AKAM), Intuit (NASDAQ:INTU), Southwest Airlines (NYSE:LUV).
- High foreign sales and low tax rates (avoid): Abbott Labs (NYSE:ABT), Agilent (NYSE:A), Mondelez (NASDAQ:MDLZ), XL Group (NYSE:XL), Waters (NYSE:WAT), Priceline (NASDAQ:PCLN), Transocean (NYSE:RIG), PerkinElmer (NYSE:PKI), Nvidia (NASDAQ:NVDA), Lam Research (NASDAQ:LRCX), Western Digital (NASDAQ:WDC).
Fri, May 20, 9:18 AM
- U.S. credit card balances are on track to climb over $1T this year, closing in on the all-time high of $1.02T set just before things fell completely apart in 2008.
- Slow, but steady economic growth, an improving job market, and lenders returning to offering credit to millions of subprime consumers are behind the numbers.
- Lenders will take it where they can get it, as credit cards are one of the few areas working for banks right now, thanks to low margins on ordinary lending and a secular decline in trading profits. For now, delinquency rates are low, and profits are set to rise even more alongside Fed rate hikes.
- Capital One's (NYSE:COF) strategy to boost card usage by raising spending limits and giving out new cards is paying off: The bank's customers spent 20% more on cards in Q1 this year than last. For Citigroup (NYSE:C), average balances posted their first Y/Y increase since 2008. Balances grew at Discover (NYSE:DFS) and JPMorgan (NYSE:JPM) as well.
- Even American Express (NYSE:AXP), whose customers typically pay it all off every month, is now focusing on lending to those who will keep a balance.
- Source: The WSJ's Annamaria Andriotis and Robin Sidel
Wed, May 11, 9:51 AM
- A full valuation and competitive pressures likely to challenge earnings growth in the medium term add up to a downgrade to Neutral from Outperform for Discover (DFS -0.4%) from Macquarie's Vincent Caintic.
- The $59 price target is maintained. After a 30% run higher from the February low, the stock is currently at $55.74.
Sun, Apr. 24, 6:27 PM
- via Credit Suisse, the 15 hottest large cap "rising stars," followed by the number of large cap funds that own them, and the change vs. prior quarter.
- SYF - Synchrony Financial, 74 | 47
- MSFT - Microsoft, 350 | 36
- GOOGL - Alphabet 324 | 39
- MCD - McDonald's, 104 | 24
- DAL - Delta Air Lines, 114 | 19
- GPN - Global Payments, 34 | 19
- TSN - Tyson Foods, 61 | 18
- CVX - Chrvron, 180 | 17
- DFS - Discover, 90 | 16
- RTN - Raytheon, 85 | 16
- WFC - Wells Fargo, 250 | 16
- GIS - General Mills, 63 | 15
- JPM - JPMorgan Chase, 276 | 15
- URI - United Rentals, 36 | 15
- CBS - CBS Corp., 65 | 14
- CMCSA - Comcast, 223 | 14
- "We are wary of owning too many Rising Stars, as the potential for differentiation has diminished,"
Wed, Apr. 20, 10:52 AM
- Total loan growth of 4% year-over-year was at the low end of the company's targeted range this year. Card sales were higher by 4% Y/Y, or 6% if excluding the impact of lower gasoline prices (though the leap year in Q1 added 1%). Organic student loans were up 15%, and personal loans grew 9%.
- As for funding, deposits were higher by 6% from last quarter, and made up 45% of funding at quarter's end.
- Addressing possible credit deterioration due to the energy crash, management says there has been some in energy-related states. However - prior to big decline in oil prices - those markets had been performing better than the national average for the portfolio, so now they've essentially come down to the rest of the country.
- Now read: Discover Financial Services (DFS) CEO David Nelms on Q1 2016 Results - Earnings Call Transcript (April 19)
- DFS +6.95%
Tue, Apr. 19, 5:39 PM
Discover Financial Services is a direct banking and payment services company. It operates through its subsidiaries, Discover Bank and Discover Home Loans, Inc. The company operates through two segments: Direct Banking and Payment Services. The Direct Banking segment includes consumer banking and... More
Industry: Credit Services
Country: United States
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