Discover Financial Services (DFS) reported quarterly earnings Tuesday of $602 million, up 15% from the same period a year earlier, as gains in various lending segments partially offset losses in the company's payments business.
The earnings improvement was also aided by a $37 million decline in its loan-loss provision from the same period a year earlier, largely due to a drop in chargeoffs.
Earnings per share climbed 21%, to a $1.20 per share, beating by five cents the consensus of analysts surveyed by Bloomberg.
In its flagship credit card business, the Riverwoods, Ill., company reported 4% growth in sales volume, along with a record low delinquencies. But Discover's payment services business recorded a $21 million loss, which the company attributed largely to its efforts to support its European payments business.
The company blamed the losses in its payments business on charges related to supporting Diners Club International franchises. The total dollar volume in Discover's payment business also fell by 2%, which the company attributed to actions by competitors and merchants.
Discover's credit card loan portfolio grew by 5% from a year earlier, as did its student loan portfolio. But the company said that loan yields fell.
Net interest income was up $116 million, or 9%, from the second quarter of the prior year. Net interest margin was reported at 9.44%, up 0.16%, as lower funding costs helped offset the drop in loan yields.
Discover's expenses rose by 2% from the same period a year earlier, with higher employee compensation and increased credit card marketing among the factors cited.