Discover Financial Services, the credit card company that took $1.2 billion from the bank rescue fund, said its fiscal third-quarter profit more than tripled as it curbed overdue loans and expenses.
Net income for the quarter ended Aug. 31 rose to $577.5 million, or $1.07 a share, from $180.1 million, or 37 cents, a year earlier, the Riverwoods, Ill., company said last week. The results were buoyed by a $287 million gain on the latest installment of an antitrust settlement with Visa Inc. and MasterCard Inc.
Card companies' profits have been squeezed this year as defaults set record highs and investors stopped buying packages of securitized loans.
Discover has not yet decided when it will repay the $1.2 billion it accepted from the Treasury Department's Troubled Asset Relief Program.
It would have posted a second-quarter loss without benefit of the antitrust settlement. The final installment is to be paid in the current quarter, which ends Nov. 30.
The company wrote off 8.39% of its managed card loans, less than its forecast of 8.5% to 9%. Writeoffs in the final month of the quarter climbed to 9.16%, from 8.43% in July.
Michael Taiano, an analyst at Sandler O'Neill & Partners LP, has a "hold" rating on Discover shares, which have tripled since March 2. "We like the story, but we think the stock looks full at these levels," he said.
Discover released its earnings Thursday; its shares were trading at $15.92 Friday morning, up 2.58% from Thursday's close.
