Discover reports $104 million first quarter 2010 loss
Riverwoods, Ill, March 16, 2010 -- Discover Financial Services /quotes/comstock/13*!dfs/quotes/nls/dfs (DFS 15.22, -0.08, -0.52%) today reported a net loss for the first quarter of 2010 of $104 million, as compared to net income of $120 million for the first quarter of 2009. Results for the first quarter of 2010 included a pre-tax addition to loan loss reserves of $305 million ($185 million after tax), which brings the company's reserve coverage to approximately 12 months of losses. Net income for the first quarter of 2009 included approximately $297 million (after tax) related to the Visa/MasterCard antitrust litigation settlement.
The company has received regulatory approval to redeem the $1.2 billion of preferred stock that it issued to the U.S. Treasury under the TARP Capital Purchase Program. Prior to such redemption, Discover Bank will issue $350 million of tier 2 qualifying capital in the form of subordinated debt. The subordinated debt offering is expected to be completed during the second quarter, subject to market conditions.
First Quarter Highlights
- Discover card sales volume increased 5% from the prior year to $22 billion.
- Loans were approximately $50 billion. The student loan portfolio grew $2 billion from the prior year, while credit card loans decreased $3 billion.
- The first-quarter net charge-off rate was 8.51%, and the over 30 days delinquency rate was 5.05%.
- Expenses were down 15% from the prior year.
- Payment Services segment profit before tax was up 28% to $37 million, and transaction volume was $36 billion, a 2% increase from the prior year.
- Deposit balances originated through direct-to-consumer and affinity relationships were $14.8 billion, an increase of $2.3 billion from the prior quarter.
"Discover's performance this quarter reflects the emergence of a more favorable economic environment, as our Discover card sales volume has now shown four consecutive months of year-over-year growth and delinquency levels have declined," said David Nelms, chairman and chief executive officer of Discover. "We were also pleased with the continued strong growth of our direct-to-consumer deposit business."
"Our reserve addition this quarter is consistent with our conservative balance sheet management approach," Nelms added. "By continuing to strengthen our foundation and invest in the Discover franchise, we believe we are well-positioned to deliver on our strategy of becoming the leader in direct banking and payment services, particularly as the U.S. economy improves."
Conference Call and Webcast Information
The company will host a conference call to discuss its first quarter results on Tuesday March 16, 2010, at 4:00 p.m. Central time. Interested parties can listen to the conference call via a live audio webcast at http://investorrelations.discoverfinancial.com .
About Discover
Discover Financial Services /quotes/comstock/13*!dfs/quotes/nls/dfs (DFS 15.22, -0.08, -0.52%) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discoverfinancial.com .
Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the financial supplement filed as Exhibit 99.2 to the company's Form 8-K filed today with the Securities and Exchange Commission ("SEC"). Both the earnings release and the financial supplement are available online at the SEC's website (http://www.sec.gov) and the company's website (http://investorrelations.discoverfinancial.com ).
Source: Company press release.