Discover Financial Services last week signaled to analysts it expects to report lower-than-expected earnings for its fiscal first quarter ended Dec. 31. Discover plans to report the quarter’s earnings on Tuesday.
The Riverwoods, Ill.-based card company says it will record a reserve pretax increase of $305 million, bringing its reserve coverage to approximately 12 months of losses. The reserve addition results from a new analytical process that enhances the company’s ability to estimate incurred losses on nondelinquent accounts, Discover notes in a news release.
Discover expects to report a loss per share of 22 cents to 23 cents, which includes the impact of the reserve addition. The company was unable to comment on previous losses.
Discover further estimates the net principal charge-off rate for its Direct Banking Segment will be about 8.5%, up from 8.43% the previous quarter. The segment operates consumer and business credit cards issued through Discover Bank.
A representative from Discover was unable to comment on the pre-earnings announcement.
