* 2nd-qtr earnings $1.20/shr vs est $1.15
* Credit card loan volume up 5 pct to $49.80 bln
* Personal loans increase 22 pct to $652 mln
* Card sales volume rises 4 pct
July 23 Discover Financial Services'
quarterly profit beat market estimates as loans increased in its
credit card business and interest charges declined.
Credit card loans rose 5 percent to $49.8 billion in the
second quarter while delinquency, or late payment rates for
loans over 30 days, fell 25 basis points to 1.50 percent, the
company said on Tuesday.
The growth in credit card loans suggested that customers
were more at ease in spending than they were last year.
Discover's net charge-off rate, the percentage of loans
written off as unrecoverable, fell 38 basis points to 2.34
percent from a year earlier.
U.S. consumer spending is likely to have risen 8 percent in
the second quarter, compared with 7 percent in the first
quarter, according to Credit Suisse.
Discover said personal loans increased 22 percent to $652
million from a year earlier. The company has been increasing its
reliance on deposit funding and diversifying its lending to
areas such as student loans since the financial crisis.
Net interest income, the difference between what is earned
on loans and what is paid out on deposits, rose about 9 percent
to $1.43 billion.
Net profit rose to $602 million, or $1.20 per share, from
$525 million, or 99 cents per share, a year earlier. Revenue,
net of interest expense, rose 9 percent to $2.04 billion.
Analysts had expected Discover to earn $1.15 per share on
revenue of $2.01 billion, according to Thomson Reuters I/B/E/S.
The company, like American Express Co, issues its
own cards and lends directly to consumers but its business is a
quarter of its rival's size.
The two companies also compete with Visa Inc and
MasterCard Inc to process transactions for banks.
Total interest expense fell 11 percent to $297 million,
while Discover card sales volume rose 4 percent.
Discover peer Capital One Financial Corp reported a
higher quarterly profit last week on strong growth in its credit
Discover said its net interest margin rose 16 basis points
to 9.44 percent, reflecting decreased funding costs.
"We continue to expect net interest margin to expand
somewhat in the second half of the year...", Chief Financial
Officer Mark Graf said on a conference call.
Loan loss provisions decreased 8 percent to $240 million,
showing that the company expects fewer defaults on loans.
Discover's shares were little changed in extended trading
after closing at $50.71 on the New York Stock Exchange. They
have risen about 14 percent since the last quarterly results.