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The layoffs of 500 employees that Discover Financial Services plans for mid-May will not affect customer service positions, a Discover spokesperson tells CardLine in an e-mail message. As CardLine reported Thursday (CardLine Special Bulletin, 4/9), most of the layoffs will affect a variety of jobs based at Discover's Riverwoods, Ill., headquarters. "It crosses departments and positions," the spokesperson says of the planned cuts. Discover has around 12,000 employees. Most reductions in Discover's call centers, which are located outside of Discover's headquarters, will come from attrition and reduced hiring instead of layoffs, the spokesperson says. Like many card issuers, Discover is weathering a difficult year. Discover reported net income of $120.4 million for the first quarter ended Feb. 28, an increase of 48.3% from $81.2 million for the same period a year earlier. But Discover would have posted a loss for the quarter if not for a $297 million after-tax boost from payouts related to an antitrust settlement Visa Inc. and MasterCard Inc. reached with Discover last year. "I'm not surprised by the layoffs," Sanjay Sakhrani, an analyst with New York-based consulting firm Keefe, Bruyette and Woods, tells CardLine. "They were a little bit fat when they were spun off of Morgan Stanley." Despite charge-offs recently reported at 7.15% of managed receivables (CardLine, 3/17), Discover is faring well compared with issuers whose charge-off rates are above 8.5%, Sakhrani says. "Their credit quality is likely to outperform the industry given the fact that they didn't grow a lot in recent quarters and the fact that they have a fairly long-term portfolio," he adds.
