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Discover Financial Services (DFS)

  • Yesterday, 8:05 AM
  • Sat, Jan. 24, 4:48 PM
    • The financial sector is off to a worse start to the year than even the energy names, with the XLF down 3.9% YTD vs. the XLE's 3.2% decline. The S&P 500 is roughly flat. The SPDR KBW Bank ETF (NYSEARCA:KBE) is off 7.5%, and the Regional Bank ETF (NYSEARCA:KRE) is lower by 6.9%.
    • Q4 earnings results haven't been wonderful, but financial names had been savaged well before those reports started coming out. Instead there's a difficult regulatory regime that won't quit, and - for now - it's looking like "wait'll next year" for the rising interest rates that were supposed to drive profit margins higher. The 10-year/2-year spread - already pretty low at 150 basis points to start the year - has narrowed to 137 bps.
    • A partial roll call of banks: Bank of America (NYSE:BAC-12.1% YTD, Citigroup (NYSE:C-10.1%, JPMorgan (NYSE:JPM-9.4%, Morgan Stanley (NYSE:MS-9.4%, Regions Financial (NYSE:RF) -14.7%, KeyCorp (NYSE:KEY) -4.5%, PNC Financial (NYSE:PNC-5.4%, Bank of New York (NYSE:BK-9.1%, Capital One (NYSE:COF) -6%, Discover (NYSE:DFS-13.6%.
    • Other spread-starved sector names: MetLife (NYSE:MET-9.8%, AIG (NYSE:AIG-8%, Prudential (NYSE:PRU-10.8%, Schwab (NYSE:SCHW-9.9%.
    • Some of what's working in financials: Blackstone (NYSE:BX+6.7%, E*Trade (NASDAQ:ETFC+1.2%, WisdomTree (NASDAQ:WETF+12.3%, Legg Mason +2.8%.
  • Thu, Jan. 22, 9:52 AM
    • "Guidance stated the revenue margin will likely be modestly down due to NIM compression, lower protection products revenue, higher rewards rate and lower payments volume," says Credit Suisse, cutting its price target to $71 from $74, and its earnings estimates. "NIM is expected to be down in 2015 due primarily to higher funding costs."
    • The team now sees 2015 EPS at $5.40 vs. $5.60 previously, and 2016 at $5.75 from $5.95.
    • Nomura maintains its Buy rating, but cuts the price target to $68 from $75, with analyst Bill Carcache believing the company may have kitchen-sinked this quarter by pulling forward much of its 2015 reserve building.
    • Buy the dip, says RBC Capital, boosting its price target to $72 and keeping the stock as a Top Pick.
    • DFS -7.5%
    • Previously: Discover -3.8% as results come up short (Jan. 21)
  • Wed, Jan. 21, 4:24 PM
    • Q4 net income of $404M or $0.87 per share vs. $553M of $1.19 (as adjusted) one year ago.
    • Total loans of $70B up 6.4% Y/Y. Credit card loans of $56.1B up 5.6%. Net charge-off rate of 2.26% up 17 basis points. Payment services transaction dollar volume of $51B up 2%.
    • Direct Banking segment pretax income of $646M off 29% Y/Y thanks mostly to a one-time $178M charge related to the elimination of the credit cards rewards forfeiture reserve. Net interest income up 7% Y/Y, with NIM of 9.77% down 5 basis points.
    • Payment Services segment pretax income of $2M vs. $24M a year ago, mostly due to a $21M fair value adjustment from classifying Diners Club Italy as held-for-sale. Dollar volume of $51 up 2% Y/Y.
    • 6M shares repurchased during quarter for $400M, cutting float by 1%.
    • Conference call at 5 ET
    • Previously: Discover Financial Services misses by $0.11, misses on revenue (Jan. 21)
    • DFS -3.8% after hours
    | Comment!
  • Wed, Jan. 21, 4:06 PM
    • Discover Financial Services (NYSE:DFS): Q4 EPS of $1.19 misses by $0.11.
    • Revenue of $2.04B (-4.2% Y/Y) misses by $160M.
    • Shares -1.4%.
    • Press Release
    | Comment!
  • Tue, Jan. 20, 5:35 PM
  • Fri, Jan. 16, 4:20 PM
    • Discover Financial Services (NYSE:DFS) declares $0.24/share quarterly dividend, in line with previous.
    • Forward yield 1.6%
    • Payable Jan. 19; for shareholders of record Feb. 5; ex-div Feb. 3.
    | 1 Comment
  • Nov. 26, 2014, 2:12 AM
    • Discover (NYSE:DFS) is suing Visa (NYSE:V) over anti-competitive practices in its debit card business and is seeking compensation for lost profit.
    • While Visa's debit cardholders typically use a signature to authorize transactions, Discover's Pulse Network uses a PIN.
    • Discover is challenging a Visa rule that requires Visa signature debit card issuers to also include Visa's PIN services, which limits the competition of other PIN networks like Pulse.
  • Nov. 19, 2014, 9:36 AM
    • Discover (DFS -0.6%) customers can now redeem their Cashback Bonus for as little as a penny by, for example, applying rewards to their statement balance or directly into their bank accounts.
    • Additionally, CashBack bonus rewards will never expire, and will not be forfeited with account closure, inactivity, or delinquency.
    • The company expects to take a $178M Q4 charge to reflect the changes.
    • Source: Press Release
    | Comment!
  • Nov. 13, 2014, 9:49 AM
    • Capital One (COF +0.8%) in an outlier to the upside in the credit card names in early action after Deutsche Bank initiates coverage on the stock with a Buy and $92 price target. American Express (AXP -0.2%) is started at Hold.
    • Deutsche cuts Discover FInancial (DFS -0.4%) to Hold from Buy, citing valuation and high expectations for loan growth which the company could find tough to meet. CapOne, says Deutsche, offers a better risk/reward.
    | Comment!
  • Oct. 22, 2014, 9:47 AM
    • "We are focused on maintaining our strong position in a very competitive rewards environment," said CFO Mark Graf on the earnings call (transcript) last night. Management, he says, is "revisiting" the rewards program with a goal of making redemptions easier and getting rid of forfeiture triggers.
    • While not yet finalized, management expects a onetime charge of $185M in Q4 due to the extinguishment of all or part of the current reserve for rewards forfeiture.
    • DFS -4.6%
    • Previously: Discover Financial Services beats by $0.03, revenue in-line
    • Previously: Discover loan growth up 7.4% year-over-year
    | Comment!
  • Oct. 21, 2014, 4:40 PM
    • Q3 net income of $644M or $1.37 per share vs. $593M and $1.20 a year ago.
    • Direct Banking: Pretax income of $891M up 7% Y/Y. Total loans of $67.3B up 7.4%. Credit card loans of $53.7B up 6.6%. Personal loans up 20.9%. Student loans up 4.5%. Net interest income up 9%; net interest margin of 9.79% up 14 bps. Delinquency rate for CC over 30 days past due of 1.71% up four basis points. Expenses up 6%.
    • Payment Services: Pretax income of $28M flat Y/Y.
    • Share repurchases: About 10M shares for $622M. Float down 2% Q/Q/
    • Conference call at 5 ET
    • Previously: Discover Financial Services beats by $0.03, revenue in-line
    • DFS +0.2% AH
  • Oct. 21, 2014, 4:29 PM
    • Discover Financial Services (NYSE:DFS): Q3 EPS of $1.37 beats by $0.03.
    • Revenue of $2.2B (+6.8% Y/Y) in-line.
    • Press Release
    | Comment!
  • Oct. 20, 2014, 5:35 PM
  • Oct. 16, 2014, 6:01 PM
    • Discover Financial Services (NYSE:DFS) declares $0.24/share quarterly dividend, in line with previous.
    • Forward yield 1.55%
    • Payable Nov. 20; for shareholders of record Nov. 6; ex-div Nov. 4.
    | Comment!
  • Aug. 28, 2014, 10:40 AM
    • Discover (DFS -0.5%) now ties with American Express for the highest customer-satisfaction ranking by cardholders, according to J.D. Power. It's the first time ever Discover has taken the top spot - it's come in 2nd to AmEx ever year since the survey began in 2007.
    • Behind Discover's big move, says J.D. Power's Jim Miller, are its efforts to improve customer service both over the phone and online, and TV viewers are certainly aware of the large volume of Discover commercials emphasizing the friendliness of its people.
    • Another long-time issue - that Discover's cards aren't accepted as widely as Visa and MasterCard - is fading, with the number of U.S. locations taking Discover up 24% since 2009 vs. 15% for Visa and MC.
    | 1 Comment
DFS vs. ETF Alternatives
Company Description
Discover Financial Services is a direct banking and payment services company. The Company offers credit card loans, private student loans, personal loans, home equity loans and deposit products.
Sector: Financial
Industry: Credit Services
Country: United States