Discover Financial Services ( DFS Quick Quote DFS - Free Report) reported fourth-quarter 2020 adjusted earnings of $2.59 per share, beating the Zacks Consensus Estimate of $2.37 by 9.3%. Moreover, the bottom line improved 15% year over year owing to a solid performance by its Direct Banking business. The company witnessed strong growth in its digital banking model. Operational Update
In the reported quarter, the company’s revenues — net of interest expenses — dropped 4% year over year to $2.8 billion due to lower other income.
However, the top line beat the Zacks Consensus Estimate by 0.1%. Total loans declined 6% year over year to $90.4 billion. Interest expenses of $383 million decreased 37.7% year over year. Total operating expenses increased 8% to $1.3 billion due to higher one-time expense items and rise in compensation. However, the same was partly offset by decreased marketing and professional fees. Segmental Update Direct Banking Segment
This segment’s pre-tax income came in at $991 million, up 12.2% year over year owing to a decrease in the provision for credit losses. This was partly offset by lower revenue, net of interest expense as well as increased operating costs.
Total loans dipped 6% year over year to $90.4 billion. Credit card loans fell 7% to $71.5 billion. Personal loans were down 7% while private student loans inched up 3%, both on a year-over-year basis. Net interest income slipped 2% year over year due to lower average receivables and an unfavorable net impact from lower market rates. Net interest margin was 10.63%, up 34 basis points from the year-ago quarter. Payment Services Segment
Payment Services pre-tax income was $24 million in the quarter under review, down 41.5% from the year-earlier period due to lower Diners Club and Network Partners revenues.
Payment Services volume was up 6% from the prior-year period. PULSE dollar volume expanded 10% year over year, fuelled by higher average spend per transaction related to the pandemic. Diners Club volume contracted 28% from the year-earlier quarter due to the COVID-19 impact. Network Partners volume expanded 23%, backed by AribaPay. Strong Financial Position
Discover Financial’s total assets were worth $112.9 billion as of Dec 31, 2020, down 1% year over year.
Total liabilities as of Dec 31, 2020 were $102 billion, flat year over year. Total equity was $10.8 billion on Dec 31, 2020, down 8.2% year over year. Share Repurchase Update
The board of directors recently approved a new $1.1-billion share repurchase program, which can be terminated at any time. The new plan expires Dec 31, 2021.
Discover Financial sports a Zacks Rank #2 (Buy), currently. You can see
the complete list of today’s Zacks #1 Rank stocks here. Upcoming Releases From Finance Sector
Some stocks worth considering from the finance sector with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:
Moodys Corporation ( MCO Quick Quote MCO - Free Report) has a Zacks Rank #3 (Hold) and an Earnings ESP of +3.78% at present. American International Group, Inc. ( AIG Quick Quote AIG - Free Report) has an Earnings ESP of +0.85% and a Zacks Rank of 3, currently. Aflac Incorporated ( AFL Quick Quote AFL - Free Report) has an Earnings ESP of +0.64% and a Zacks Rank of 3, presently. (We are reissuing this article to correct a mistake. The original article, issued on January 21, 2021, should no longer be relied upon.)