UPDATE 1-Discover Financial profit rises 7 pct on higher card growth

Tue Jul 22, 2014 5:05pm EDT

(Adds details, CEO comment)

July 22 (Reuters) - Payment services provider Discovery Financial Services Inc reported a 7 percent rise in quarterly profit as customers spent more using credit cards in a recovering U.S. economy.

Total loans rose 6.8 percent to $65.86 billion in the second quarter ended June 30 while credit card loans rose about 6 percent to $52.74 billion.

Net income rose to $644 million, or $1.35 per share, from $602 million, or $1.20 per share, a year earlier.

"Our record earnings per share this quarter reflect outstanding fundamental performance in our Direct Banking segment in terms of loan growth and credit performance," Chief Executive David Nelms said.

Revenue, net of interest expense, rose 6.4 percent to $2.17 billion.

Analysts on average had expected earnings of $1.30 per share on revenue of $2.16 billion, according to Thomson Reuters I/B/E/S.

Net interest income, the difference between what the firm earns on loans and what its pays on deposits, rose about 11.1 percent to $1.59 billion.

Rival Capital One Financial Corp reported an 8 percent rise in quarterly profit last week, helped by higher card loans and stable credit quality.

Bigger rival American Express Co reports quarterly results next week.

Discover's total card volume rose about 7 percent to $31.73 billion, while provision for loan losses rose 50 percent to $360 million.

Shares of the company closed at $64.06 on the New York Stock Exchange on Tuesday. They have gained more than 13 percent since the beginning of the year. (Reporting by Avik Das in Bangalore; Editing by Joyjeet Das)