Discover Financial Services on Thursday reported stronger profits, as double-digit growth in the Riverwoods, Ill., company’s credit card book and lower taxes offset an uptick in problem loans.
Discover earned $720 million during the third quarter, or 20% more than in the same period last year. Earnings per share were $2.05, or a penny short of an estimate of analysts compiled by FactSet Research Systems.
In a press release, new President and CEO and Roger Hochschild said, “Consistent execution against our strategic priorities enabled us to deliver strong loan and revenue growth once again this quarter. "
Hochschild took the helm earlier this month,
Total loans increased 8%, to $85.9 billion, as the company expanded total average loans in its credit card portfolio by 10% in a competitive market. Credit cards account for about 80% of total loans.
Still, credit quality deteriorated slightly. The 30-day delinquency rate on credit cards edged up 18 basis points, to 2.32%, while the net principle charge-off rate rose 34 basis points, to 3.14%. The provision for loan losses increased 10%, to $742 million.
Net interest income rose 8%, to $2.2 billion. The interest yield in the company’s credit card business climbed 23 basis points, to 13.06%.
Noninterest revenue, meanwhile, grew 5%, to $501 million, thanks to higher net interchange revenue, as well as stronger loan fees.
Noninterest expenses climbed 7%, to just over $1 billion, mostly from an increase in compensation and marketing costs.
