RIVERWOODS, Ill. - Discover Financial Services (NYSE: NYSE:DFS) announced a robust second quarter of 2024, with earnings and revenue significantly exceeding analysts' expectations. The company reported earnings per share (EPS) of $6.06, which was a substantial $2.98 higher than the consensus estimate of $3.08. Revenue also outperformed, coming in at $4.54 billion against the expected $4.18 billion.
The financial services firm experienced a 17% year-over-year (YoY) increase in revenue, up from $3.88 billion in the second quarter of the previous year. The company's interim CEO and President, Michael Shepherd, attributed the strong quarter to solid loan growth, margin expansion, and higher non-interest revenue. He also highlighted strategic moves such as the sale of student loan assets and resolutions in litigation that have favorably impacted the company's financial position.
Discover's stock responded positively to the news, with shares rising 2.29%.
The company's total loans at the end of the period were $127.6 billion, an 8% increase from the previous year's $117.9 billion. The net interest income for the quarter rose by 11% YoY, driven by higher average receivables and net interest margin expansion. Non-interest income also saw an 18% increase from the prior year, attributed to higher net discount/interchange revenue, loan fee income, and transaction processing revenue.
Despite these gains, the total net charge-off rate increased to 4.83%, up 161 basis points from the same period last year. The credit card net charge-off rate also rose to 5.55%, indicating a higher level of defaulted loans that the company was unable to recover.
Operating expenses saw a 24% YoY increase, partly due to charges for expected regulatory penalties related to a card misclassification matter. Nonetheless, the company's net income surged by 70% compared to the second quarter of 2023, reaching $1.53 billion.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.