Discover sees higher delinquency in 2009

NEW YORK (Reuters) - Discover Financial Services (DFS.N), the fourth-largest U.S. credit-card network, sees delinquency rates and debt write-offs rising in 2009, Chief Executive Officer David Nelms said on Thursday.

Nelms also said that the company is likely to set aside more money for loan losses in coming quarters, but said he does not expect the company to post net losses even amid the current financial turmoil.

Riverwoods, Illinois-based Discover said earlier Thursday that its net principal charge-off rate, an annualized measure of bad debt write-offs, climbed to 4.76 percent in its fiscal third quarter from 3.23 percent a year earlier, while the 30-day delinquency rate rose to 3.58 percent from 2.81 percent a year before.

Credit card companies' delinquency rates have been rising in recent quarters as the U.S. economy has deteriorated.

"We expect charge-offs to continue to rise next year," Nelms said in an interview with Reuters.

Nelms said the company -- which posted an 11 percent drop in third fiscal quarter net income-- had tightened its credit standards and closed inactive accounts to reduce future loan losses.

Discover set aside $364.8 million to cover bad loans in the third quarter ended August 31, up from $145.8 million in the year-earlier period, as net charge-offs rose.

Discover's shares were down 41 cents or 2.7 percent to $14.81 in afternoon trading on the New York Stock Exchange.

(Reporting by Juan Lagorio and Dan Wilchins, editing by Gerald E. McCormick)