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Discover Misses Earnings Estimates but Beats Revenue Estimates

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Part 4
Discover Misses Earnings Estimates but Beats Revenue Estimates PART 4 OF 8

Why Discover Financial’s Total Interest Income Rose in 1H17

Credit card portfolio

Discover Financial Services (DFS) reported a rise in its total interest income in 1H17 compared to 1H16. In 1H16, the company reported total interest income of ~$4.2 billion. In 1H17, DFS reported total interest income of ~$4.6 billion, reflecting a rise of 11%. This rise was mostly due to the company’s increased interest income generated from credit card accounts.

Why Discover Financial’s Total Interest Income Rose in 1H17

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In 1H16, Discover Financial reported interest income from credit card loans of ~$3.5 billion and in 1H17, its interest income from credit card interest was ~$3.8 billion.

Discover reported a rise in its interest income garnered from other loans in 1H17 compared to 1H16. In 1H17, the company reported interest income of $746.0 million generated from other loans compared to $657.0 million generated in 1H16. 

Discover’s other two components that generated total interest income in 1H17 follow:

  • interest income from investment securities: $14.0 million
  • other interest income: $64.0 million

Net interest margin

Discover Financial Services (DFS) reported a net interest margin of ~10.1% on June 30, 2017. Its consumer financial peers (XLF) reported the following net interest margins on the same date:

  • Wells Fargo (WFC): 2.9%
  • PNC Financial Services Group (PNC): ~2.8%
  • Ally Financial (ALLY): ~2.8%

In the next article of this series, let’s look at Discover’s expected total dividends in 2017.

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