RIVERWOODS, Ill. – Discover Financial Services (NYSE: NYSE:) announced a robust second quarter of 2024, with earnings and revenue significantly exceeding analyst expectations. The company reported earnings per share (EPS) of $6.06, which was substantially $2.98 higher than the consensus estimate of $3.08. Revenue also performed better, coming in at $4.54 billion, versus the expected $4.18 billion.
The financial services company saw a 17% year-over-year (YoY) increase in revenue, compared to $3.88 billion in the second quarter of the previous year. The company’s interim CEO and president Michael Shepherd attributed the strong quarter to solid credit growth, margin expansion and higher non-interest income. He also highlighted strategic steps such as student loan sales and litigation resolutions that have had a beneficial impact on the company’s financial position.
Shares of Discover responded positively to the news, with shares rising 2.29%.
The company’s total loans at the end of the period were $127.6 billion, up 8% from last year’s $117.9 billion. Net interest income for the quarter increased 11% year over year, driven by higher average receivables and net interest margin expansion. Non-interest income also increased 18% year-over-year, driven by higher net discount/interchange income, loan fee income and transaction processing revenue.
Despite these gains, the total net depreciation rate increased to 4.83%, an increase of 161 basis points compared to the same period last year. The net charge-off rate on credit cards also rose to 5.55%, indicating a higher level of defaulted loans that the company was unable to recover.
Operating expenses increased 24% year over year, partly due to charges for anticipated regulatory fines related to a card misclassification issue. Nevertheless, the company’s net income rose 70% compared to the second quarter of 2023, to $1.53 billion.
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