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Discover Financial’s Q2 2018: Total Loans Grew 9% Year-over-Year

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Jul. 27 2018, Updated 10:18 a.m. ET

Discover’s Q2 2018 EPS

On July 26, Discover Financial Services (DFS) released its earnings report for the second quarter. The company beat analysts’ expectations for EPS by posting $1.91 in the second quarter, compared to the expectation of $1.88. Mastercard (MA) second-quarter EPS stood at $1.66.

The strong economic environment, fueled by the jobs growth, is the primary factor that led to a rise in Discover Financial’s credit card loans on a sequential basis.

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At the end of the second quarter, Discover Financial had total credit card loans of $67.8 billion. In the first quarter, it had $65.5 billion. Competitor (IYF) Capital One Financial Corporation (COF) had credit card loans amounting to $109.7 billion in the second quarter. American Express (AXP) disbursed total loans of $78.6 billion.

Revenues fell short of expectations

Discover Financial posted total revenues of $2.6 billion, which missed analyst expectations by $30 million. The company had disbursed total loans of $84.8 billion at the end of the second quarter, which implies year-over-year or YoY growth of 9%. The company’s consumer deposits increased 12% YoY and ended at $42.3 billion.

Discover Financial’s direct banking segment recorded income of $837 million before income taxes, which implies a $6 million rise on a YoY basis thanks to net interest income. However, the YoY increase was largely offset by a rise in operating expenses as well as a loan losses provision.

The payment services division saw income of $40 million before income taxes, which reflects a $4 million YoY increase because of a rise in the revenues due to international growth.

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