Buoyed by a litigation settlement, Discover Financial Services posted a profit of $120 million, or 25 cents a share, for the quarter that ended Feb. 28 but continues to shore up its capital to reserve against a predicted surge in credit losses.

The Riverwoods, Ill., card company, which reported results for its fiscal first quarter Thursday, said profits rose 48% from a year earlier, including a $297 million after-tax gain from an antitrust settlement with Visa Inc. and MasterCard Inc. (Discover expects three more payments at the "$472 million" pretax level this year, according to Roy Guthrie, its chief financial officer.) Excluding discontinued operations, including the March 2008 sale of the Goldfish business in the U.K., profit fell 50%.

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