What Discover Financial Has in Mind Moving Forward


Jul. 2 2018, Updated 3:50 p.m. ET

First-quarter performance

Discover Financial Services (DFS) generated net interest income amounting to $2.1 billion in the first quarter, reflecting a rise of 11% on a YoY (year-over-year) basis.

During the same period, the company’s interest income stood at $2.6 billion, which is expected to witness positive momentum moving forward due to an expected rise in loans primarily due to lower unemployment.

However, growing trade tensions could impact retail loan demand, which could adversely affect Discover Financial’s revenue. In the first quarter, the company garnered net discount and interchange revenue of $254 million, reflecting a rise of 9% YoY.

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What would help Discover Financial?

The Tax Cuts and Jobs Act has helped companies to reduce their tax burdens and provided companies with opportunities to expand their business operations by making deployments. Discover Financial is expected to make deployments moving forward, which could help it boost its growth prospects. Deployments toward rewards as well as marketing would help improve its loan book.

Of its total revenue (after deducting interest expenses) of $2.6 billion in the first quarter, Discover Financial’s direct banking segment garnered $2.5 billion, while its payment services division generated $81 million.

In 2018, Discover and its competitors (IYF) are expected to report the following revenues:

  • Discover Financial Services: $10.7 billion
  • Capital One Financial Services (COF): $28.3 billion
  • American Express (AXP): $40.3 billion
  • Mastercard (MA): $15.0 billion

Next, we’ll study the factors that could impact analysts’ ratings on consumer finance companies. We’ll also see what analysts are recommending for Discover Financial Services.


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