uploads/2018/07/dfs-post.jpg

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

By

Updated

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.

Article continues below advertisement

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.

Advertisement

More From Market Realist