Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=220440
Story Retrieval Date: 12/8/2013 8:03:46 AM CST
Discover Financial Services reported a sharp increase in first-quarter profit, due to higher consumer credit use as well as record low credit card loan delinquency.
“Credit continues to surprise to the positive,” DFS Chief Financial Officer Mark Graf said.
Net income climbed to $673 million from $650 million in the year-earlier quarter. Earnings per diluted share rose to $1.33 from the year-earlier $1.21. Net interest income rose 9 percent to $1.4 billion from $1.3 billion.
Home loans and revenues from charging merchants for the use of their credit cards increased to $1.7 billion from $1.6 billion.
The latest Federal Reserve data shows that nationwide consumer credit increased in February at a seasonally adjusted annual rate almost 8 percent over the year-ago February rate.
“The increase in the payment rate to all-time high levels over the past several years suggests that while consumers continue using their credit cards, they are more frequently paying off the entire monthly balance,” Bob Napoli, securities analyst at William Blair wrote in an earlier report on the rise in credit card use.
“I think it’s a continually evolving situation where in 50 years of the existence of a credit card as a product, the models are built off that history and we’ve never seen an environment like this,” Graf said.
DFS stock closed at $44.33, up 72 cents.