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Discover Rides Loan Growth to 12% Increase in Profits

Discover Financial Services (DFS) rode credit card loan growth in the fourth quarter to earnings of $602 million, an increase of nearly 12% over the same period in 2012.

The Riverwoods, Ill.-based card issuer reported earnings per diluted share of $1.23. That surpassed the $1.06 earnings per share that Discover recorded in the fourth quarter of 2012, and it also beat the $1.20 consensus estimate of analysts surveyed by Bloomberg.

Discover reported earnings after the markets closed Thursday. In after trading its shares were up 3%, to $54.

Credit card loans grew by 4% from the prior year, and card sales volume grew by 3% during the same period, according to Discover.

"The fourth quarter concluded a strong year for Discover, with record net income for 2013," David Nelms, the company's chief executive officer, said in a news release.

Continuing a recent trend, pretax income from Discover's payment services division fell in the fourth quarter. It totaled $26 million, down from $32 million in the fourth quarter of last year.

The company said that the division's total revenue also declined, primarily because of a decline in revenue from processing transactions on Discover's Pulse network.

The fourth-quarter results from Discover's banking division were more positive. Overall, loans were up 5% over the fourth quarter of 2012, driven in part by a 27% increase in personal loans.

Net interest income in Discover's banking division rose by 10%, to $141 million.

The rate of credit card loans that are delinquent by more than 30 days was 1.72% in the fourth quarter. That was down slightly from the fourth quarter of the previous year, but up a bit from the third quarter of 2013.

Expenses in the company's banking division rose 4% from the prior-year period, to $33 million. Discover attributed the increase in part to a larger headcount and higher expenses for information processing.

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