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Discover Financial's profit jumps 13 pct in 2Q

Discover Financial's profit jumps 13 pct in 2Q

July 23rd, 2013 by ALEX VEIGA, AP Business Writer in News

An increase in loans and interest income helped boost Discover Financial Services' net income by 13 percent in the second quarter, trumping Wall Street expectations.

The credit card issuer and lender said Tuesday that sales volume for its namesake credit card grew 4 percent to $27.6 billion in the April-June period. Credit card loans rose 5 percent to $49.8 billion.

Apart from credit cards, Discover benefited from loan growth across several of its operating units, including private student loans, personal loans and home loans. All told, overall loans increased 6 percent to $61.7 billion from a year earlier.

Credit card issuers such as Discover benefit from an improving economy and consumer spending.

This year, the economy is showing more robust signs of growth, with employers having added an average 202,000 jobs the past six months, up from 180,000 in the previous six. The housing market is also gaining strength. And consumer confidence last month hit the highest level since January 2008, according to the Conference Board.

Discover's payment services business didn't fare as well as its other segments. It generated a $21 million loss for the quarter, partly because of charges that Discover booked to support its Diners Club International franchises in Europe.

For the three months ended June 30, Discover posted a profit after paying preferred dividends of $588 million, or $1.20 per share.

That compares with net income of $520 million, or 99 cents per share, a year earlier.

Revenue net of interest expense climbed to $2.04 billion from $1.87 billion.

Analysts polled by FactSet expected earnings of $1.15 per share on $2 billion in revenue.

Discover credited loan growth, revenue from Discover Home Loans and lower funding costs for the revenue growth. That also helped lift net interest income, or money earned from loans, by 9 percent.

Riverwoods, Ill.-based Discover, best known for its namesake credit card, is the sixth-largest U.S. credit-card issuer.

Discover's shares ended regular trading down 17 cents at $50.71. The stock added 3 cents to $50.74 in after-hours trading.