Discover Financial Services has posted record growth this quarter as they doubled their earnings from the same quarter last year. Losses also dropped substantially from the previous year.
Discover have consumers to thank for helping them almost double their earnings this quarter compared with the same time period in 2010.
Consumers have been turning to credit cards once more and are spending more as the United States economy continues to recover from the recession. There is further good news for the credit card issuer in regard to losses from non payments.
It appears consumers are paying their bills on time and Discover saw their losses from uncollectible card loans drop to 4.82%, just under half the figure or this time last year which was 8.82%. Discover also expanded their business to include other lending and credit areas. This has also had a positive impact on the record growth for this quarter.
Discover, like many other credit card companies and financial institutions, started to look at new ways to recover lost revenues caused by the recent economic crisis. One of the ways Discover have moved to recover their losses is by pursuing lending in areas other than credit cards.
In 2010, Discover purchased the student lending division of Citigroup – ‘Student Loan Corp.’ – for a reported $600 million. This made Discover America’s third largest student loan provider and increased the company’s loan portfolio to $52.5 billion, an increase of approximately 5 percent. In a further step towards other areas of lending, Discover last month acquired the origination division of tree.com which propelled them into the mortgage lending business.
Experts say that Discover is fast outgrowing some of the country’s financial giants, including JP Morgan Chase and Bank of America. Discover’s overall balance of loans has increased by 5 percent despite a small decrease (1%) in credit card loans at the start of the year. Discover reports that its stock is currently $1.09 per share and that they are posting a profit of $600 million as of May 31st this year. When this is compared to figures from the same time last year, a staggering increase is apparent. In May 2010 discover share prices were just 33 cents per share and profits were posted as $258 million.
Chief Executive Officer David Nelms says that Discover is benefiting from fewer loan defaults and expanding into other loan business because it is boosting dividends and buying back stock.
