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Discover Financial Services Reports Third Quarter Net Income Of MILLION PER DILUTED SHARE

The following excerpt is from the company's SEC filing.

- Discover Financial Services (NYSE: DFS) today reported net income of

$612 million

per diluted share for the

third quarter of 2015

, as compared to

$644 million

third quarter of 2014

. The company's return on equity for the

Third Quarter Highlights

Total loans grew

$2.7 billion

, from the prior year to

$70.1 billion

Credit card loans grew

$2.0 billion

$55.7 billion

and Discover card sales volume increased

from the prior year or approximately 7% excluding gas purchases.

Net charge-off rate for credit card loans decreased

basis points from the prior year to

and the credit card delinquency rate for loans over 30 days past due decreased

basis points to

Payment Services transaction dollar volume for the segment was

$46.0 billion

, down

from the prior year.

"Strong credit performance and continued share buybacks drove earnings per share growth," said David Nelms, chairman and CEO of Discover. "While total loan growth slowed slightly due to consumer spending levels, it remained solid. In addition, we achieved the highest level of new card accounts since the recession, which should bode well for the future."

Segment Results:

Direct Banking

Direct Banking pretax income of

$950 million

in the quarter was down

$31 million

, driven by higher expenses in part due to previously announced anti-money laundering remediation expenses, partially offset by a lower provision for loan losses.

Total loans ended the quarter at

compared to the prior year. Credit card loans ended the quarter at

from the prior year. Personal loans increased

$595 million

, from the prior year and private student loans increased

$275 million

, from the prior year. Excluding purchased student loans, private student loans grew

$814 million

Revenue net of interest expense increased

$7 million

, relatively flat to the prior year.

Net interest income increased

$47 million

, from the prior year, benefiting from loan growth partially offset by margin compression. Net interest margin was

basis points from the prior year primarily due to an increase in funding costs. Interest expense as a percent of total loans increased

basis points from the prior year due to funding mix and higher rates. Credit card yield was

12.03%

, a decrease of

basis point from the prior year.

Other income decreased

$40 million

, from the prior year due to run-off in mortgage origination income, lower protection products revenue and higher rewards expense.

The delinquency rate for credit card loans over 30 days past due was 1.65%, down 6 basis points from the prior year and up 10 basis points from the prior quarter. Credit card net charge-off rate for the third quarter was

basis points from the prior year and down

basis points from the prior quarter. The student loan net charge-off rate excluding purchased credit-impaired ("PCI") loans was

basis points from the prior year. The personal loans net charge-off rate of

increased by

Provision for loan losses of

$332 million

$24 million

from the prior year primarily due to a smaller reserve build. The reserve build for the

million, versus a

million reserve build in the prior year. Net charge-offs were flat year-over-year.

Expenses increased

$62 million

, from the prior year mostly driven by higher regulatory and compliance costs. Professional fees increased in part due to $28 million in look back related anti-money laundering remediation expenses. Employee compensation increased largely due to...


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