Discover Reports Better-Than-Expected Q2 Results: Here's The Details

Discover Financial Services DFS reported its second-quarter financial results on Wednesday. Here's a look at the key figures from the report. 

The Details: Discover reported GAAP earnings of $6.06 per share, beating the estimate of $3.07 per share, and quarterly Net Interest Income (NII) of $3.524 billion.

Net interest income for the quarter increased by $347 million, or 11% year-over-year, driven by higher average receivables and net interest margin expansion. Net interest margin was 11.17%, up 11 basis points versus the prior year.

Card yield was 15.99%, up 85 basis points from the prior year primarily driven by a lower promotional balance mix and lower payment rates, partially offset by higher interest charge-offs. Interest expense as a percent of total loans increased 71 basis points from the prior year period, primarily driven by higher funding costs.

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Digital Banking pretax income of $1.8 billion for the quarter was $694 million higher than the prior year period reflecting a lower provision for credit losses and increased revenue net of interest expense partially offset by increased operating expenses.

Total loans ended the quarter at $127.6 billion, up 8% year-over-year, and up 1% sequentially. Credit card loans ended the quarter at $100.1 billion, up 7% year-over-year. Personal loans increased $1.2 billion, or 13%. Private student loans were down 1%, and were classified as held-for-sale as of June 30, 2024.

The total net charge-off rate was 4.83%, up 161 basis points from the prior year period and down 9 basis points from the prior quarter reflecting continued seasoning of recent vintages.

“Discover’s fundamental operating performance remains very good, as shown by our loan growth, margin expansion and higher non-interest revenue in the quarter,” said Michael Shepherd, Discover’s Interim CEO and President.

“Additionally, we advanced several critical initiatives including entering into an agreement to sell our student loan assets, favorably resolving litigation in our Payment Services segment, and entering into a class action settlement agreement for the card misclassification matter.”

Discover will host a conference call to discuss its second-quarter results at 8:00 a.m. ET Thursday morning.

DFS Price Action: According to Benzinga Pro, Discover Financial shares are up 5.01% after-hours at $148.49 at the time of publication Wednesday.

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