Mar. 21, 2014, 9:30 AM
- American Express (AXP), Discover (DFS), and Capital One (COF) all have sizable capital surpluses under the Fed's severely adverse scenario, says Buckingham, and are thus poised for sizable capital returns. All three names are ahead 1-2% in opening trades.
- Last night: Discover unveils proposal for 20% dividend boost and $1.6B in buybacks.
- Stress test results
Mar. 20, 2014, 4:21 PM| 2 Comments
Mar. 20, 2014, 10:35 AM
- The results of the Fed stress tests on the usual banking industry suspects are expected today, but this year's version includes 12 new companies added to last year's list of 18. Newly subjected U.S.-based lenders: DFS, NTRS, HBAN, MTB, ZION. Foreign-owned U.S. bank holding companies: BBVA Compass Bancshares, BMO Financial, HSBC N.A. Holdings, RBS Citizens Financial Group, Santander Holdings USA (SAN), UnionBanCal (MTU).
- The CCAR results - at which the Fed will give a thumbs up/thumbs down on banks' capital return plans - are due on March 26.
Mar. 11, 2014, 3:43 PM
- Analyst Sameer Gokhale estimates Discover (DFS -1.4%) will come through the Fed stress tests (results on March 20) with a minimum Basel III Tier 1 common equity ratio of 8.95% and Fifth Third (FITB -0.8%) 7.3%. As both should be comfortably above 7% under the severely adverse scenario, higher payouts for should be justified.
- Gokhale prefers to use payout yield - total annual dividends and buybacks divided by the share price - as opposed to payout ratio, and Discover and Fifth Third have two of the highest, 8.6% and 6.2%, respectively.
- He's expecting Discover's quarterly dividend to be boosted to $0.21-$0.23 per share from $0.20 now, and $1.1B-$1.5B in buybacks to be approved. Fifth Third could lift its dividend by $0.03 to $0.15 per share and be approved for $1.B-$1.3B in buybacks.
Feb. 20, 2014, 3:29 PM
- Expecting dividends to grow 49% on average for the banks subject to the Fed's stress tests (about the same as last year), Markit, says Citigroup (C) and Bank of America (BAC) will lead the way with 400% boosts. "They are the last of the major banks paying minimal dividends ... change is overdue."
- While 400% is a big number, Citi and BofA will continue to lag their peers in terms of yield (400% growth on a penny just leads to a nickel).
- Also expected to have a significant pop is Morgan Stanley (MS) - a doubling of the payout to $0.10 per share and a 1.4% yield. Others in the top 5 in increases are Zions Bancorp (ZION) with a 75% boost to $0.07 and Regions Financial (RF) up 67% to $0.05.
- The others: KEY +27%, HBAN +20%, BK +20%, STI +20%, COF +17%, DFS +15%, AXP +13%, STT +12%, JPM +11%, CMA +11%, PNC +9%, USB +9%, GS +9%, FITB +8%, WFC +7%, NTRS +6%, and no soup for BBT and MTB where the dividends are expected to be flat at $0.23 and $0.70 per share, respectively.
- As for ETFs, the dividend jumps are expected to have the biggest impact on the XLF which would see a 25% increase in payout: The ETF has 81 companies, but the top 5 holdings - BofA, Wells, JPM, Citi, USB - make up 41% of assets. In contrast, just two CCAR banks make up the top five holdings of the KBE and it should see a more muted increase of just 18%.
- Related ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, PFI, KBWB, RKH, QABA, FNCL, FINU, KRU, RWW, KBWR, RYF, PSCF, KRS, FINZ
Feb. 18, 2014, 10:38 AM
- Discovery Financial (DFS +0.2%) reports a credit card writeoff rate of 2.2% for January which is an unchanged level from the last two months.
- The rate had dipped below 2% in October.
- The company reports the rate of delinquencies rose to 1.8% during January to mark the highest level since last March.
- SEC Form 8-K
Feb. 14, 2014, 7:15 AM
Feb. 3, 2014, 3:13 PM
- Until now, just a handful of lenders are in the business of refinancing student loans, with just Wells Fargo and SunTrust among the only two of the seven largest banks in the private loan market doing so. But RBS's Citizens Financial just rolled out a refi product, and Discover (DFS -2.4%) chief David Nelms tells American Banker his company plans to follow suit.
- Discover made more than $1B in private student loans in 2013 - 13% of the company's total loan production. For now, low variable rates make the business a discouraging one for lenders, and for borrowers, there's not a ton of incentive to refinance. Private loans typically have rates higher than government ones and have fewer consumer protections.
- Still, should the trend catch fire, those lenders without a program in place could find themselves losing market share.
Jan. 24, 2014, 10:20 AM| 4 Comments
Jan. 24, 2014, 7:41 AM
- Total loans grew $3.2B, or 5% from last year to $65.8B. Credit card loans grew $2B, of 4% to $53.1B. Discover card sales volume up 3%.
- Has credit quality gotten as good as it's going to get? The net charge-off rate for credit card loans ticked up 4 bps from last quarter to 2.09% and delinquencies over 30 days gained 5 bps to 1.72%.
- 7M shares repurchased during quarter, reducing float by 1%.
- FBR maintains its Outperform rating and boosts the price target to $65.
- DFS +1.6% premarket
- Press release, Q4 results
Jan. 23, 2014, 4:09 PM| 2 Comments
Jan. 23, 2014, 12:10 AM
Jan. 22, 2014, 5:35 PM
Jan. 14, 2014, 9:30 AM| Comment!
Nov. 27, 2013, 1:42 PM
- American Express (AXP +0.4%), Discover (DFS +0.3%), U.S. Bancorp (USB +0.2%), and Wells Fargo (WFC -0.1%) are best positioned to be allowed large capital returns (about 70%) after the Fed's early 2014 stress tests, says Credit Suisse's Moshe Orenbuch, while Ciitgroup (C +0.2%) and PNC Financial (PNC +0.9%) are likely to show the biggest improvement from last year.
- Overall, his team expects large cap bank capital returns to be 65% next year vs. about 48% in 2013. The median dividend payout ratio is expected at 22%, level with this year.
- Orenbuch notes the CCAR will be tougher this time around - notably by assuming a global, not just domestic meltdown, and assuming a significant reversal in the property market - with commercial real estate exposure particularly harshly judged.
- Balanced against that and likely winning, however, are far stronger capital positions of the banks, says Orenbuch.
- Financial and banking ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, IPF, SEF, IAI, IAT, IYG, FXO, PFI, IXG, KBWB, RKH, QABA, KCE, FINU, RWW, KRU, RYF, KBWR, AXFN, PSCF, KRS, FNCL, FINZ, KBWX, KBWC
Nov. 18, 2013, 11:01 AM
- Looking for an edge, Discover (DFS) will begin providing customers credits scores for free on their monthly bills. The company says it's the first major credit-card issuer to offer such service.
- Customers of the "Discover it" card will begin getting free scores starting today and the service will roll out to all other clients in the next few months.
- Press release.
DFS vs. ETF Alternatives
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