Discover Financial Services announced news of its second quarter earnings results to Wall Street on Wednesday (July 26) that showed total loans increased 8 percent, or $6.1 billion, while credit card loans saw the same growth in the quarter.
In a press release, the credit card company said Discover card sales volumes increased 5 percent compared to the second quarter of 2016. For the quarter, the company reported a net income of $546 million, or $1.40 per diluted share compared to $616 million, or $1.47 per diluted share for the second quarter of 2016. The company’s return on equity for the second quarter of 2017 was 19 percent.
“We delivered profitable loan growth, strong revenue growth and positive operating leverage, which helped to offset normalizing credit costs,” said David Nelms, chairman and CEO of Discover, in prepared remarks. “Our new capital plan includes higher dividends and planned share repurchases, and we expect to continue to deliver a leading yield to our shareholders.”
Total net charge-off rates, excluding PCI loans, increased 52 basis points from the prior year to 2.79 percent, and the total delinquency rate over 30 days past due excluding PCI loans increased 33 basis points from the prior year to 1.93 percent. The company said consumer deposits grew $3.6 billion (11 percent) from the prior year to $37.7 billion. Payment Services transaction dollar volume was $50.1 billion, up 12 percent from the prior year.
In terms of the delinquency rate for credit card loans over 30 days past due, Discover said it was 2.00 percent, which is up 37 basis points from the prior year and down 6 basis points from the prior quarter. The credit card net charge-off rate for the second quarter was 2.94 percent, up 55 basis points from the prior year and 10 basis points from the prior quarter. The student loan net charge-off rate, excluding purchased credit-impaired (PCI) loans, was 1.15 percent, up 5 basis points from the prior year. The personal loans net charge-off rate of 3.18 percent increased by 80 basis points from the prior year. Net charge-off rates were generally higher because of supply-driven credit normalization and the seasoning of loan growth from the last few years, Discover Financial Services said.