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Discover Financial (DFS) Beats on Q4 Earnings & Revenues
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Discover Financial Services’ (DFS - Free Report) fourth-quarter 2016 earnings of $1.40 per share beat the Zacks Consensus Estimate of $1.38 by 1.4%. The bottom line also improved 23% year over year. For full-year 2016, earnings came in at $5.77 per share, up 12% from the 2015 figure. Also, the figure beat the Zacks Consensus Estimate of $5.74.
For the reported quarter, the company’s revenues, net of interest expenses, grew 7% year on year to $2.4 billion. The top line also surpassed the Zacks Consensus Estimate of $1.8 billion. For 2016, the company’s revenues, net of interest expenses came in at $9.1 billion, up 4% from the 2015 figure.
For the reported quarter, net interest income grew almost 9% year over year to $1.9 billion, attributable to loan growth and higher net interest margin.
Total other expense decreased 4% to $897 million as the decline recorded in marketing and business development, information processing & communications, professional fees, premises and equipment expenses and other expenses were more than the rise employee compensation and benefits. Segment Update
Direct Banking Segment
This segment’s pre-tax income increased $101 million or 13% from the year-ago quarter to $868 million. This was because higher net interest income and lower operating expenses were partly offset by increased provision for loan losses and lower other income.
Other income decreased 2% year on year to $401 million mainly due to increased promotional rewards and standard rewards.
Provision for loan losses increased 19% to $579 million from the prior year, mainly due to higher net charge-offs.
Discover Financial’s credit card net charge-off rate increased 29 basis points (bps) year over year to 2.47%. The over-30 days’ delinquency rate increased to 2.04%, up 32 bps year on year. Net charge-off rates were higher due to expected seasoning of loan growth.
Total loans increased 7% year over year to $77.2 billion. Personal loans grew 18% to $991 million and credit card loans rose 6% to $61.5 billion year over year. Private student loans inched up 2%. Excluding purchased student loans, however, private student loans grew 13% from the prior year quarter.
Discover Financial’s total card sales volume grew roughly 3% year over year.
Net interest income grew 9% from the prior year to $1.9 billion due to loan growth and higher net interest margin. Net interest margin increased 32 bps year over year to 10.07%.
Expenses decreased 2% year on year to $846 million. Professional fees and marketing expenses declined, whereas employee compensation rose year over year.
Interest expense as a percent of total loans increased 10 bps year over year, mainly due to change in funding mix and higher market rates.
Payment Services Segment
Pre-tax income at Discover Financial’s Payment Services segment fell $6 million to $15 million year over year due to higher expenses.
Payment Services transaction dollar volume was $46.1 billion, flat year over year.
Transaction dollar volume from PULSE declined while Diners Club International’s volumes increased 8% year over year.
Financial Position
Discover Financial had total assets worth $92.3 billion as of Dec 31, 2016 compared with $86.8 billion as of Dec 31, 2015.
Total liabilities as of Dec 31, 2016 were $81 billion compared with $75.5 billion as of Dec 31, 2015.
Total equity was $11.32 billion at the end of Dec 31, 2016 compared with $11.28 billion at the end of Dec 31, 2015.
Discover Financial’s return on equity for the fourth quarter was 20%.
Share Repurchase Update
During the fourth quarter, Discover spent approximately $477 million to repurchase around 7.7 million shares of common stock.
Diluted shares outstanding declined 2% year over year.
Discover Financial Services Price, Consensus and EPS Surprise
Among other firms in the finance space, Ally Financial Inc. (ALLY - Free Report) and Credit Acceptance Corp. (CACC - Free Report) are slated to release results on Jan 31, while Regional Management Corp. (RM - Free Report) is scheduled to release on Feb 7.
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Discover Financial (DFS) Beats on Q4 Earnings & Revenues
Discover Financial Services’ (DFS - Free Report) fourth-quarter 2016 earnings of $1.40 per share beat the Zacks Consensus Estimate of $1.38 by 1.4%. The bottom line also improved 23% year over year. For full-year 2016, earnings came in at $5.77 per share, up 12% from the 2015 figure. Also, the figure beat the Zacks Consensus Estimate of $5.74.
For the reported quarter, the company’s revenues, net of interest expenses, grew 7% year on year to $2.4 billion. The top line also surpassed the Zacks Consensus Estimate of $1.8 billion. For 2016, the company’s revenues, net of interest expenses came in at $9.1 billion, up 4% from the 2015 figure.
For the reported quarter, net interest income grew almost 9% year over year to $1.9 billion, attributable to loan growth and higher net interest margin.
Total other expense decreased 4% to $897 million as the decline recorded in marketing and business development, information processing & communications, professional fees, premises and equipment expenses and other expenses were more than the rise employee compensation and benefits.
Segment Update
Direct Banking Segment
This segment’s pre-tax income increased $101 million or 13% from the year-ago quarter to $868 million. This was because higher net interest income and lower operating expenses were partly offset by increased provision for loan losses and lower other income.
Other income decreased 2% year on year to $401 million mainly due to increased promotional rewards and standard rewards.
Provision for loan losses increased 19% to $579 million from the prior year, mainly due to higher net charge-offs.
Discover Financial’s credit card net charge-off rate increased 29 basis points (bps) year over year to 2.47%. The over-30 days’ delinquency rate increased to 2.04%, up 32 bps year on year. Net charge-off rates were higher due to expected seasoning of loan growth.
Total loans increased 7% year over year to $77.2 billion. Personal loans grew 18% to $991 million and credit card loans rose 6% to $61.5 billion year over year. Private student loans inched up 2%. Excluding purchased student loans, however, private student loans grew 13% from the prior year quarter.
Discover Financial’s total card sales volume grew roughly 3% year over year.
Net interest income grew 9% from the prior year to $1.9 billion due to loan growth and higher net interest margin. Net interest margin increased 32 bps year over year to 10.07%.
Expenses decreased 2% year on year to $846 million. Professional fees and marketing expenses declined, whereas employee compensation rose year over year.
Interest expense as a percent of total loans increased 10 bps year over year, mainly due to change in funding mix and higher market rates.
Payment Services Segment
Pre-tax income at Discover Financial’s Payment Services segment fell $6 million to $15 million year over year due to higher expenses.
Payment Services transaction dollar volume was $46.1 billion, flat year over year.
Transaction dollar volume from PULSE declined while Diners Club International’s volumes increased 8% year over year.
Financial Position
Discover Financial had total assets worth $92.3 billion as of Dec 31, 2016 compared with $86.8 billion as of Dec 31, 2015.
Total liabilities as of Dec 31, 2016 were $81 billion compared with $75.5 billion as of Dec 31, 2015.
Total equity was $11.32 billion at the end of Dec 31, 2016 compared with $11.28 billion at the end of Dec 31, 2015.
Discover Financial’s return on equity for the fourth quarter was 20%.
Share Repurchase Update
During the fourth quarter, Discover spent approximately $477 million to repurchase around 7.7 million shares of common stock.
Diluted shares outstanding declined 2% year over year.
Discover Financial Services Price, Consensus and EPS Surprise
Discover Financial Services Price, Consensus and EPS Surprise | Discover Financial Services Quote
Discover Financial presently carries Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other firms in the finance space, Ally Financial Inc. (ALLY - Free Report) and Credit Acceptance Corp. (CACC - Free Report) are slated to release results on Jan 31, while Regional Management Corp. (RM - Free Report) is scheduled to release on Feb 7.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>