Discover Financial Services' second-quarter profit more than doubled as declining delinquency and charge-off rates allowed the credit-card lender to tuck away a smaller amount of money to cover bad loans.
The Riverwoods, Ill., company on Thursday said net income in the quarter ended May 31 was $600 million, up from $258 million a year earlier. The company earned $1.09 per diluted share in the quarter, up from 33 cents in the second quarter of 2010.
"Sustained improvements in credit performance have driven substantial releases of credit loss reserves, a portion of which has been reinvested for growth," David Nelms, the chairman and chief executive of Discover, said in a press release.
Discover's shares rose 31 cents, or 1.31%, to $23.90 in pre-market trading Thursday morning.
The percentage of credit card loans that were 30 days past-due was 2.79%, down from 4.85% from a year ago. The company's charge-off rate fell to 5.01% in the quarter from 8.56% a year earlier.
As a result, Discover recorded a $176 million provision for loan losses, which was 76% smaller than a year earlier.
Its credit card loans fell about 1% from a year earlier to $45 billion, though when factoring student and personal loans, its total loan balances rose 5% to $52.5 billion.
Part of its total loan growth was the result of Discover's $600 million acquisition in January of Student Loan Corp., which was majority owned by Citigroup Inc.
