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
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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.
Oct. 21, 2013, 8:07 PM
- The Discover (DFS) earnings miss looks to have been driven by an unexpected loan-loss reserve build of $42M vs. last year's reserve release of $167M - made especially curious given current benign credit trends. Eliminating both years' reserve actions has EPS of $1.25 this Q, well ahead of $1.22 expectations and 12% higher than a year ago (see slide 3 of earnings call presentation).
- Immediately pressed on this during the earnings call (transcript), CFO Mark Graf says the key issue requiring the reserve build "was very clearly what we perceived to be something good" - the current book of business is having such good credit experience that the "recovery buckets" from a large block of soured loans are not getting refilled. Net charge-offs will therefore increase because the company isn't getting as much benefit from recoveries. "We don't see any situation where there is any type of a meaningful deterioration in credit in the near-term horizon at all," says Graf.
- Previous: Q3 results.
- Shares -4.2% AH to $51.50.
Oct. 21, 2013, 5:47 PM
Oct. 21, 2013, 4:23 PM
- 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.
Oct. 21, 2013, 4:12 PM| 1 Comment
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