Discover Financial Services reported last Friday that holders of its credit cards were doing better than at any time in the past 25 years with the delinquency rate for credit card loans over 30 days past due dropping to a record low of 2.79%. The company also said that the charge-off rate for its cards dropped to 5.01%.
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RelatedThe news was also positive for the company itself with a reported net $600 million income for the second quarter of 2011. This is more than a 100% year-over-year increase from its reported net income of $258 million for the same quarter last year.
In addition to the positive credit card news, the financial services company shared other highlights. At $25 billion, Discover card sales volume grew by 9% since the same period last year. Payment Services earned a pretax income of $43 million, a 19% increase over the previous year, and its transaction volume increased by 24% since last year to $46 billion this quarter.
Discover’s direct banking results were similarly strong. The segment’s pretax second quarter income of $883 million was nearly double the $497 million it was in the second quarter of 2010.
Talking about this great numbers, David Nelms, chairman and chief executive officer of Discover, said, “Our all-time record results this quarter reflect the effectiveness of the Discover business model. Sustained improvements in credit performance have driven substantial releases of credit loss reserves, a portion of which has been reinvested for growth. The benefits of these investments can be seen in both our Direct Banking and Payment Services results this quarter.”
Nelms added, “Our capital levels have also benefited from this outstanding performance, leading us to our recent announcement of a $1 billion share repurchase program. While the U.S. economy has yet to show significant strengthening, we are confident that we can continue to achieve profitable growth in all of our lending businesses, complemented by the contribution from our payments activities."
Many industry observers believe it is these numbers that led the company’s Board of Directors to announce on June 15 that it had approved a share repurchasing program to buy up to $1 billion of its common stock. Though scheduled to expire on June 14, 2013, the share purchasing program may be terminated at any time.
Follow @CreditDonkey or write to Andrew Green at andrew@creditdonkey.com
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