Discover Reports Better-Than-Expected Q3 Results, Higher Delinquency Rates YOY: Details

Discover Financial Services DFS reported its third-quarter financial results after Wednesday's closing bell. Here's a look at the details from the report. 

The Details: Discover reported quarterly earnings of $3.69 per share, which beat the analyst consensus estimate of $3.44. Quarterly revenue came in at $4.453 billion, which beat the analyst consensus estimate of $4.346 billion and is a 10.11% increase over sales of $4.044 billion from the same period last year.

The company reported third-quarter 30 or more days delinquency rates of 3.84%, up from 3.41% from the same quarter last year and 90 or more days delinquency rates of 1.87%, up from 1.57%.

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• Digital Banking pretax income of $1.2 billion for the quarter was $401 million higher than the prior year period, reflecting increased revenue net of interest expense and a lower provision for credit losses partially offset by increased operating expenses.
• Total loans ended the quarter at $127.0 billion, up 4% year-over-year and down 1% sequentially. Credit card loans ended the quarter at $100.5 billion, up 3% year-over-year. Personal loans increased $879 million, or 9%. Private student loans were down 19% driven by the first closing of the private student loan portfolio sale.
• Net interest income for the quarter increased $333 million, or 10% year-over-year, driven by higher average receivables and net interest margin expansion.
• Net interest margin was 11.38%, up 43 basis points versus the prior year.
• Card yield was 16.23%, up 80 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.
• Payment Services pretax income of $84 million was largely flat year-over-year. Payment Services volume was $100.5 billion, up 9% from the prior year period.
• Discover Network volume was down 4% reflecting a slowdown in Discover card sales volume.
• PULSE dollar volume was up 14% driven by increased debit transaction volume.
• Diners Club volume was up 7% year-over-year reflecting strength across most regions.

“Discover’s financial performance remained strong in the third quarter, benefiting from increased net interest margin, modest loan growth, and some credit improvement,” said Michael Shepherd, Discover’s Interim CEO and President. “We are pleased to have completed the first of four student loan sale closings, which will simplify our business. Additionally, we continued to make good progress on our risk management and compliance capabilities.”

DFS Price Action: According to Benzinga Pro, Discover Financial shares are down 0.64% after-hours at $146.58 at the time of publication Wednesday.

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