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July 01, 2010

  • News:  Discover Reports Increased Profits

    While Fitch released its upgrade on Discover Financial Services, the credit card issuer/network reported increased profits during its second fiscal quarter 2010. Discover said the increase was due to cardholders increased credit card spending as well as a decline in early delinquencies of 30 days late. Because early delinquencies are a predictor of future credit card defaults, the company was able to reduce the amount of revenue allocated to future write-offs by 44 percent from the same time last year. Discover joins the top U.S. nations in reporting that card delinquencies and defaults are improving and revenue is up; a sign that consumers are feeling more confident with the outlook on the economy.

    Discover reported credit card defaults decreased to 7.97 percent from the previous quarter of 8.51 percent, however, up slightly from 7.79 percent the same time last year. The company predicts that number to continue decreasing during the next quarter. David Nelms, CEO of Discover said that unemployment continues to be historical highs however the company does not expect that to affect its credit card defaults since most of the unemployed have already defaulted. Discover has placed a greater emphasis on the development and growth of its consumer banking segment rather than growing the card market. Mostly as a result of sweeping reform that will inhibit card issuers from profiting off the misfortune of others.

    Net income for the second quarter brought Discover an increase of $184.6 million up from a loss of $148.9 million the same time last year. As one of the U.S. top credit card issuers, Discover is expected to earn 11 cents per share after income was cut by 13 cents per share because the company redeemed $1.2 billion of its preferred stock. Nevertheless, the company's sales increased 6 percent to $23 billion resulting from an increase of card spending. Discover also said that with the increased consumer confidence and stable repayment of card debt, earnings will push upward.

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