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Discover Financial’s quarterly profit jumps on higher interest income
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July 17 (Reuters) – Discover Financial Services Inc on Wednesday reported a 70% rise in second-quarter profit as a high-rate environment helped the U.S. credit issuer earn more in interest income.
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The company’s shares rose 4.7% to $148 in after-hours trading.
Credit card-focused lenders have outperformed the broader sector this year, benefiting from gains in interest income. Companies like Discover are shielded from market volatility in mortgages as customers pay a higher amount of interest on their credit cards.
Discover, based in Riverwoods, Illinois, reported net interest income of $3.52 billion in the second quarter, up nearly 11 percent from the same quarter last year.
Discover’s provision for credit losses fell to $739 million in the quarter ended June 30, from about $1.31 billion in the same period a year earlier.
Discover’s net income jumped to $1.52 billion, or $6.06 per share, from $895 million, or $3.54 per share.
Earlier, Discover said it would sell a portfolio of student loans to buy lenders Carlyle and KKR for up to $10.8 billion.
Separately, Capital One said Wednesday it would commit $265 billion over five years to lending, philanthropy and investments if its acquisition of Discover goes through.
Its $35 billion Discover deal will create the largest U.S. credit card issuer by balances and the sixth-largest bank by assets. It will also give Capital One control of Discover’s card payment network, the fourth-largest payment network operator after Visa, Mastercard and American Express. (Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Maju Samuel; Editing by Jaiveer Singh Shekhawat)
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