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Discover Financial Services reported a 7% drop in quarterly earnings on Tuesday, driven by rising expenses, a growing loss provision and shrinking yields in its flagship credit card business.
April 21 -
Earnings at Discover Financial Services plunged by 33% in the fourth quarter, largely due to a charge tied to the firm's mortgage business and a previously announced revision to its flagship credit card program.
January 21 -
Discover Financial Services will exit the residential mortgage-origination business that it acquired in 2012.
June 16 -
Discover Financial Services has entered into a written agreement with the Federal Reserve to improve its anti-money laundering procedures.
May 28 -
Discover Financial Services will refund $16 million to consumers and pay a $2.5 million penalty to resolve U.S. Consumer Financial Protection Bureau claims that the bank engaged in illegal student loan servicing practices.
July 22 -
Discover, the only major U.S. card network that did not support Apple Pay at the mobile wallet's launch, has inked a deal with Apple, eliminating some of the fragmentation in the mobile wallet's deployment.
April 27 -
It's looking more likely that a judge will have to impose a fix that will bring American Express' merchant rules into compliance with federal law.
March 25 -
American Express, Discover and Capital One all reported significant increases in their marketing spending last quarter, part of a larger upward trend in expenses.
January 23
Discover Financial Services in Riverwoods, Ill., continued its run of quarterly profit declines in the second quarter, due primarily to higher costs for compliance, marketing and customer rewards.
The card company's profit fell 7% from a year earlier, to $599 million. However, earnings per share of $1.33 were a penny higher than the average estimate of analysts polled by Bloomberg.
Discover has now recorded three consecutive quarters of declining year-over-year profit, including drops of 7% and 33% in the first quarter this year and final quarter of 2014, respectively.
The main cause of the second-quarter decline was an 18% increase in expenses, to $927 million. Discover incurred $19 million in costs tied to improving its anti-money-laundering program, fixes that were
Those compliance efforts also factored into an 8% rise in employee compensation costs, to $326 million, and a 37% increase in professional fees, to $153 million.
Chief Executive David Nelms has tried to diversify beyond the core card business, and in the second quarter those efforts suffered some setbacks. Discover announced in June that it would
And on Wednesday, the company hit a major speed bump in another key auxiliary business, private student loans. The Consumer Financial Protection Bureau
There were areas of growth in the second quarter, too. Average credit card loans grew 4.2%, to $54.9 million, a rate Nelms called solid in a company press release Wednesday.
However, the average yield on card loans fell 6 basis points, to 12.04%.
Credit quality improved, with the 30-day delinquency rate on all loans falling 7 basis points, to 1.49%, and the gross principal chargeoff rate 6 basis points, to 2.76%.
