Significant improvement in the credit performance of loyal customers and continued solid growth in cardholder spending aided by higher gasoline prices helped bolster Discover Financial Services’ performance for the fiscal second quarter ended May 31, the Riverwoods, Ill.-based company announced June 24.
Discover’s U.S. card-sales volume totaled $22.9 billion, up 6.5% from $21.5 billion a year earlier and a company record for the second quarter.
Credit card loan receivables decreased 7.4%, to $45.3 billion from $48.9 billion, down 7.4%, while total loan receivables were down 2%, to $50 billion from $51 billion.
The 30 day-plus delinquency rate for the quarter was 4.52%, down 56 basis points from 5.08% a year earlier. The net charge-off rate increased 18 basis points, to 7.97% from 7.79%. Discover had predicted the second quarter net charge-off rate to be between 8% and 8.5%, and it projects the third quarter rate to be between 7.5% and 8%.
Total third-party payments-segment sales volume rose 0.8%, to $37 billion from $36.7 billion. Total volume from third-party Discover issuers increased 30.8%, to $1.7 billion from $1.3 billion.
Sales volume for Discover’s Pulse PIN-debit network decreased 1.7%, to $28.6 billion from $29.1 billion. Total transactions processed on the Pulse network rose 5.6%, to 805 million from 762 million.
Diners Club International volume totaled $6.7 billion, up 8.1% from $6.2 billion a year ago.
Earlier this year, Discover signed an agreement to enable Korean credit card issuer BC Card Co.’s cardholders to use the Discover, Diners Club and Pulse networks for international purchases and cash access outside of Korea (
The company continues to expand its network globally to offer issuers new and flexible payment alternatives, Discover Chairman and CEO David Nelms told analysts during conference call to discuss the company’s earnings.
As a company, Discover reported fiscal second quarter net income of $258 million, up 14.2% from $226 million during the same period last year. Revenue net of interest expense was up 6.3%, to $1.7 billion from $1.6 billion.
The company’s Payment Services segment generated a pre-tax profit of $36.3 million, up 36% from $26.7 million.
