Pre-Spin-Off Discover Financial Reports Sharply Lower Earnings

RIVERWOODS, Ill. – Discover Financial Services, in the process of being spun-off from Morgan Stanley, said yesterday that first quarter earnings declined a whopping 64%, to $209 million. Last year’s $343 million first quarter earnings were attributed to the fall-off in charge-offs due to the 2005 bankruptcy reform bill months before; while this year’s reflect a more normalized level of charge-offs and loan loss reserves. This year’s second quarter also included $20 million of expenses related to the pending spin-off. Discover is the parent of PULSE EFT, the ATM network which it bought from 4,100 credit unions and banks just two years ago. For this year’s second quarter: managed credit card receivables were up 6% to $51.4 billion; while sales volume also increased 6% to $25.4 billion, compared to the first quarter last year. Total transactions on the Discover and PULSE networks grew by 14% over the same period last year.