Is Discover Financial in Crisis? It Mulls Student-Loan Business Sale After CEO Resignation

Discover Financial Services DFS is said to have been looking to sell its student loan business to streamline its operations.

The move comes in the wake of a series of regulatory lapses, according to a report from Bloomberg.

Though deliberations are underway, sources say that the company could also choose to retain the business.

The business unit, with a $10.2 billion portfolio of private student loans, can earn interest from alternative asset managers or rival student loan platforms.

Discover had earlier constituted an internal review of compliance, risk management, and corporate governance and temporarily suspended buybacks.

The company also had to suspend share buybacks last year due to an internal investigation into its student loan servicing business.

In the meantime, Chief Executive Officer Roger Hochschild abruptly resigned and was replaced on an interim basis by board member John Owen.

“We have made progress over the last 18 months on building out a better risk and compliance framework,” said John Owen.

Regulatory filings show that the student loan unit has a lower write-off rate than the company’s credit-card and personal-loan books.

The finance head, John Greene, said that the executives “continued to take a look at all our products, the returns and the use of capital, and try to work to optimize our allocation of capital. We’re going to continue to do that, and we’ve got more work to do.”

Price Action: DFS shares are trading higher by 0.53% at $90.56 on the last check Friday.