Discover Financial Services (DFS) is scheduled to report first-quarter results after the market closes Tuesday. The Riverwoods, Illinois-based company operates as a credit card issuer and electronic payment services company. It offers Discover Card-branded credit cards, loans and deposit products, in addition to automated teller machine, debit, and electronic funds transfer network.
The economic crisis that made people jobless reflected directly on the business of credit card issuers, leading to higher delinquency rates and charge-offs. However, the credit card data released by major card issuers Monday signal an uptick in the economy, while it is still too early to breathe a sigh of relief.
Releasing its monthly data, Discover said its charge-off in February increased to 9.11% from 8.58% in January. However, the delinquency rate in February eased to 5.50% from 5.55% in the previous month.
Bank of America Corp. (BAC) said its net charge-offs rose to 13.51% in February from 13.25% in January. But the delinquency rate in February declined to 7.23% from 7.35% in the previous month. American Express Co. (AXP) reported net charge-offs of 7.4% in February, up from 7% in January.
However, the decrease in delinquency is not expected to translate to higher profit in Discover's first quarter. The company said last week that it expects to report a loss of $0.22 to $0.23 per share for the quarter, including the impact of an increase in reserve addition. The card issuer will record an increase in reserves of $305 million pre-tax in the first quarter, which brings its reserve coverage to about twelve months of losses. This reserve addition results from a new analytical process that enhances management's ability to estimate incurred losses on non-delinquent accounts.
Discover also estimates that the first-quarter net principal charge-off rate for its Direct Banking segment will be about 8.5%, up from 8.43% in the fourth quarter 2009. The over 30-day delinquency rate is estimated to be around 5%, a reduction of nearly 25 basis points from the fourth quarter 2009.
On average, 13 analysts polled by Thomson Reuters expect the company to earn $0.12 per share in the quarter with estimates ranging between $0.04 and $0.18 per share. Revenues for the quarter are estimated to be $1.68 billion. Analysts' estimates typically exclude special items.
In the previous quarter, the company's net income from continuing operations declined 16% to $370.69 million or $0.63 per share from $443.64 million or $0.92 per share in the prior-year quarter. On a managed basis, revenue net of interest expense decreased to $2.17 billion from $2.37 billion in the year-earlier quarter.
In the first quarter of 2009, Discover reported earnings from continuing operations of $120 million or $0.25 per share. On a managed basis, revenue net of interest expense was $2.09 billion.
Among peers, American Express Co., (AXP) said recently that its fourth-quarter profit more than doubled from last year, helped by strong performance in the U.S. Card Services division and a sharp decline in loan loss provisions.
Mastercard Inc. (MA) said last month that its profit for the fourth quarter increased 23% from last year, as worldwide purchase volume improved.
DFS closed Monday's regular trade at $15.20, up $0.23 or 1.54%, on 6.14 million shares. In the past year, the stock traded in a broad range of $5.50-$17.36.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.