Discover Financial Crushes Q4 Earnings Expectations

Discover Financial Services (NYSE:DFS) reported fourth-quarter earnings that far outpaced analyst projections, sending its stock up more than 1% in pre-market today. The credit card issuer and financial services provider delivered strong results, showcasing robust growth in earnings and revenue.

The company posted adjusted earnings per share of $5.11, a significant leap over the consensus estimate of $3.20. Quarterly revenue also exceeded expectations, reaching $4.76 billion compared to analysts' forecasts of $4.41 billion.

Net income for the quarter soared by an impressive 253% year-over-year, climbing to $1.29 billion from $366 million in the same period last year. The sharp increase was driven by lower provisions for credit losses and higher revenue, partially offset by elevated operating expenses.

Total loans at the end of the quarter stood at $121.1 billion, representing a 6% year-over-year decline. However, credit card loans, which account for the majority of Discover’s portfolio, edged up 1% to $102.8 billion.

The company's net interest margin expanded to 11.96%, reflecting a 98-basis-point increase from the previous year, largely due to the sale of its student loan portfolio. While the total net charge-off rate rose to 4.64%, marking a 53-basis-point year-over-year increase, it declined by 22 basis points sequentially, signaling some stabilization in credit performance.