By ALEX VEIGA
2014-01-24 06:42 AM
LOS ANGELES (AP) -- Discover Financial Services' net income jumped 11 percent in the last three months of 2013, as users of its namesake credit card and other loan services stepped up borrowing and the company set aside less money to cover potential loan losses.
The company said Thursday that total loans grew 5 percent in the quarter versus the same period a year earlier. Credit card loans grew 4 percent. Sales volume for the lender's namesake credit card rose 3 percent during the October-December period, during which customers traditionally ramp up spending for the holidays.
Discover has been working to expand its credit card business, while also pushing further into direct banking, offering auto, personal and student loans. It also began offering home equity loans last August.
Net interest income, or money earned from loans after factoring in interest expense, grew nearly 10 percent to $1.57 billion from $1.43 billion.
In the company's payments services business, which competes with Visa and MasterCard, revenue dropped 2 percent as transaction processing revenue declined. Dollar volume for the company's payments business slipped 1 percent.
The latest quarter included a provision for potential loan losses of $354 million, down from $370 million a year earlier.
All told, Discover said that its profit after paying preferred dividends was $588 million, or $1.23 per share, in the three months ended Nov. 30. That compares with $530 million, or $1.06 per share, a year earlier.
Revenue net of interest expense grew about 6 percent to $2.13 billion, up from $2.02 billion.
Analysts polled by FactSet expected earnings of $1.17 per share on $2.1 billion in revenue.
Discover's board declared a quarterly cash dividend of 20 cents to be paid Feb. 20 to shareholders of record as of Feb. 6. The company also will pay a quarterly cash dividend of $16.25 to certain preferred shareholders. That dividend will be paid on March 3 to shareholders of record on Feb. 14.
Shares of Riverwoods, Illinois-based Discover rose $1.10, or 2.1 percent, to $53.50 in after-market trading. The stock ended regular trading down $1.26, or 2.4 percent, at $52.40.