Discover Financial Services in Riverwoods, Ill., recorded bigger profits in the fourth quarter thanks to loan balance growth across its consumer lending businesses.
But the benefits of Discover’s bulging loan portfolio were partially offset by rising chargeoffs in its flagship credit card business, as well as in student and personal loans.
The $90 billion-asset company said Tuesday that it earned $563 million during the last three months of 2016, up nearly 13% from the same period a year earlier.
“We are proud of all we accomplished in 2016, including record originations in personal and student loans as well as strong new card account growth, all of which helped us to achieve nearly 7% loan growth,” Discover CEO David Nelms said in a press release. “While the seasoning of loans from the past several years of growth continued to drive provisions, overall credit performance remained healthy.”
In Discover’s credit card segment, which accounts for nearly 80% of the company’s entire loan portfolio, the firm averaged $59.1 billion in loans during the quarter, up 5.5% from the same period a year earlier. The percentage of credit card loans that were over 30 days past due was 2.04%, up from 1.72% in the fourth quarter of 2015.
In Discover’s private student loan segment, average balances rose by 2.5% to $8.9 billion. But the segment’s 30-day delinquency rate, which excluded certain loans, rose to 2.22%, up from 1.91% in the same period a year earlier.
In the company’s personal loan business, average balances rose by 17% to $6.4 billion. The 30-day delinquency rate in the personal loan segment was 1.12%, up from 0.89% in the fourth quarter of 2015.
Companywide, the provision for loan losses was $579 million, up from $486 million a year earlier.
For 2017, Discover released a target of total loan growth between 5.5% and 7.5%, which is in line with its results last year. The company also said that it expects its chargeoff rate to be modestly higher this year.