Published December 20, 2012
Discover Financial (DFS) weighed in on Thursday with a 7% rise in fourth-quarter profits, but the card giant’s results failed to impress Wall Street.
Shares of Discover, the first of the big card companies to report results, slumped more than 4% on the earnings miss.
Discover said it earned $551 million, or $1.07 a share, last quarter, compared with a profit of $513 million, or 95 cents a share, a year earlier. Analysts had expected EPS of $1.13.
Revenue jumped 10.6% to $1.99 billion, narrowly topping the Street’s view of $1.97 billion.
“Our strategy and business model are working as we achieved organic growth in all of our lending products,” CEO David Nelms said in a statement. “I am proud of our strong performance this year and our achievement of record net income, record volumes and a strong return on equity.
Discover said its direct banking pretax income gained 7% last quarter to $827 million, while card sales volume grew 6% to $26.5 billion. At the end of the quarter, credit-card loans stood at $49.6 billion, up 6% year-over-year.
Total loans rose 6% to $61 billion and private student loans gained 6% to $426 million.
Discover said the delinquency rate for credit-card loans over 30 days past due was 1.86%, an improvement from 2.39% a year earlier but up from 1.81% in the third quarter.
Net principal charge-offs dropped by $87 million year-over-year due to a decline in delinquencies and bankruptcies.
Meanwhile, Discover’s board of directors approved of a 40% increase in the company’s quarterly dividend to 14 cents per share. The dividend is payable on January 17 to shareholders of record as of January 3.
The bar had been set high for Discover as its shares have soared 65.7% on the year through Wednesday’s close. Wall Street punished the company for the miss, driving its shares down 4.48% to $37.99.