Discover Financial Services’ (DFS - Free Report) first-quarter 2019 adjusted earnings of $2.15 per share beat the Zacks Consensus Estimate by 7.5%.Moreover, the bottom line improved 18.1% year over year on higher revenues and increased loans.
Revenues, net of interest expenses, increased 7.3% year over year to $2.7 billion in the quarter, driven by stronger net interest incomes, loan fee income and transaction processing revenues.The top line also trumped the Zacks Consensus Estimate by 0.6%.
Total loans grew 7% year over year to $88.7 billion.
Interest expenses of $632 million surged 34.8% year over year.
Total other expenses rose 5.7% to $1.02 billion due to higher employee compensation and benefits plus professional fees, marketing and business development as well as premises and equipment.
Direct Banking Segment
This segment’s pre-tax income rose 8.4% to $879 million owing to higher net interest income. However, the same was largely offset by a rise in provision for loan losses and operating expenses.
Total loans climbed 7% year over year to $88.7 billion. Credit card loans augmented 8% to $70.8 billion.
Personal loans ascended 2% year over year.Private student loans rose 2% and were up 9% excluding purchased student loans, all on a year-over-year basis.
Net interest income increased 10% year over year, driven by loan growth and net interest margin expansion. Net interest margin was 10.46%, up 23 basis points from the year-ago quarter.
Payment Services Segment
Payment Services pre-tax income was $51 million, up 13.3% from the year-earlier period, mainly due to transaction volume growth.
Payment Services transaction dollar volume was $61 billion, up 9% from the prior-year period.
PULSE transaction dollar volume expanded 9% year over year, boosted by the impact of new issuers on the network and strong growth, courtesy of the existing issuers.
Network Partners volume expanded 24% on the back of AribaPay.
Strong Financial Position
Discover Financial had total assets worth $110.7 billion as of Mar 31, 2019, up 8.6% year over year.
Total liabilities as of Mar 31, 2019were $99.5 billion, up 9.2% year over year.
Total equity was $11.2 billion on Mar 31, 2019, up 3.6% year over year.
Share Repurchase Update
During the quarter under review, the company repurchased approximately 7.2 million shares of common stock for $487 million.
Shares of common stock outstanding dipped 1.8% from the previously reported quarter’s tally.
Discover Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Releases From Finance Sector
Among other players from the finance sector having reported first-quarter earnings so far, the bottom-line numbers of American Express Company (AXP - Free Report) , Synchrony Financial (SYF - Free Report) and Nasdaq, Inc. (NDAQ - Free Report) beat the respective Zacks Consensus Estimate.
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