RIVERWOODS, Ill. (AP) - Discover Financial Services said last Tuesday that its profit fell 7 percent in the first three months of the year, as the credit card issuer and lender increased its reserves against potential loan losses and booked higher expenses.
Even so, the Riverwoods, Illinois company's earnings beat Wall Street expectations.
Discover said that total loans grew 5.9 percent from last year's January-March period to $67.6 billion. Credit card loans climbed 5.1 percent to $53.5 billion, while sales volume for the company's namesake card rose 2.7 percent from a year earlier.
Discover's payments services business hit a rough patch in the latest quarter, however. Pretax income edged lower as transaction dollar volume slipped 1 percent to $50.2 billion. Discover has been trying to get a bigger slice of the payments processing business, where it competes with American Express, Visa and MasterCard.
Meanwhile, Discover's provision for loan losses rose 43 percent to $390 million. Apart from that, other expenses climbed 11 percent to $873 million.
All told, Discover's profit after paying preferred dividends was $573 million, or $1.28 per share. That compares with $618 million, or $1.31 per share, in the same quarter last year.
The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of $1.26 per share.
Discover said revenue net of interest expense rose about 4.5 percent to $2.17 billion, matching the prediction of analysts polled by FactSet.
Discover shares fell $1.26, or 2.1 percent, to $58 in after-hours trading. The stock has risen 4.5 percent in the last 12 months.
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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on DFS at http://www.zacks.com/ap/DFS
Published: Mon, Apr 27, 2015
