Discover Financial Services Reports First Quarter Net Income of $666 Million or $1.82 Per Diluted Share

Discover Financial Services (NYSE: DFS) today reported net income of $666 million or $1.82 per diluted share for the first quarter of 2018, as compared to $564 million or $1.43 per diluted share for the first quarter of 2017. The company’s return on equity for the first quarter of 2018 was 25%.

First Quarter Highlights
• Total loans grew $6.9 billion (9%) from the prior year to $82.7 billion.
• Credit card loans grew $5.8 billion (10%) to $65.6 billion, on Discover card sales volume of $30.9 billion.
• Total net charge-off rate, excluding purchased credit-impaired (“PCI”) loans, increased 48 basis points from the prior year to 3.17% and the total 30+ day delinquency rate excluding PCI loans increased 26 basis points from the prior year to 2.23%.
• Consumer deposits grew $4.2 billion (11%) from the prior year to $41.3 billion.
• Payment Services transaction dollar volume was $56.1 billion, up 19% from the prior year.

“Our performance this quarter was characterized by robust loan and revenue growth reflecting the strength of the Discover franchise as we continued to invest in product and service enhancements,” said David Nelms, chairman and CEO of Discover. “I’m proud of our strong return on equity of 25%. In addition, this is the first full quarter reflecting the benefits of tax reform which, combined with share repurchases, led to a 27% year-over-year increase in earnings per share.”

Segment Results:

Direct Banking
Direct Banking pretax income of $811 million in the quarter declined by $13 million from the prior year driven by an increase in the provision for loan losses and higher operating expenses, partially offset by higher revenue.

Total loans ended the quarter at $82.7 billion, up 9% compared to the prior year. Credit card loans ended the quarter at $65.6 billion, up 10% from the prior year. Personal loans increased $644 million (10%) from the prior year. Private student loans increased $234 million (3%) year-over-year, and grew $727 million (11%), excluding purchased student loans.

Net interest income increased $208 million (11%) from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.23%, up 16 basis points from the prior year. Card yield was 12.85%, an increase of 20 basis points from the prior year as a result of increases in the prime rate, partially offset by a change in portfolio mix and higher interest charge-offs. Interest expense as a percent of total loans increased 23 basis points from the prior year, primarily as a result of higher market rates.

Other income increased $19 million (5%) from the prior year, driven by higher discount and interchange revenue.

Payment Services
Payment Services pretax income was $45 million in the quarter, up $1 million from the prior year, primarily driven by higher transaction processing and interchange revenue offset by a reserve release in the first quarter of 2017.

Payment Services transaction dollar volume was $56.1 billion, up 19% versus the prior year. PULSE transaction dollar volume was up 20% year-over-year primarily driven by merchant and acquirer routing decisions. Diners Club volume increased 14% year-over-year driven by continued strength of newer franchise relationships. Network Partners volume increased by 24% from the prior year driven by AribaPay.
more detail at:  https://investorrelations.discover.com/newsroom/press-releases/press-release-details/2018/Discover-Financial-Services-Reports-First-Quarter-Net-Income-of-666-Million-or-182-Per-Diluted-Share/default.aspx

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