Discover Financial Services, like so many peers in the financial sphere, took a charge in the fourth quarter tied to tax legislation passed during the period. Earnings per share on an adjusted basis was $1.51, missing the consensus by three cents.
At the end of the latest quarter, revenues were $2.6 billion, up 10.6 percent for the year, better than estimates by $10 million.
Net interest income was up 12 percent for the year to $2.1 billion. Expense growth slightly outpaced the net interest income growth, up 15 percent from last year. Student loans were up two percent, reaching $9.2 billion.
Loans were up by 9 percent, as was the credit card business, and in the case of the latter business, 3.03 percent of loans on the books tied to cards were charged off, up from 2.47 percent last year. The company’s direct banking provision for loan losses of $678 million increased $99 million from the prior year, but its overall company reserves grew by $96 million year-over-year for the quarter to reach $679 million.
Net charge-offs were 2.92 percent, and the firm guided to a rate of 3 percent to 3.25 percent in 2018. The latest tally was up 53 basis points from last year. In total, the net charge-off rate for the year reached 2.7 percent, higher than the 2.1 percent seen in 2016.
The delinquency rate for credit card loans over 30 days past due was 2.28 percent, which was up 24 basis points from the prior year and 14 basis points from the prior quarter.
Payment services transaction volume grew by 17 percent in the period to reach a total of $54 billion. Meanwhile, PULSE transaction dollar volume was up 19 percent year-over-year. Diners Club volume increased 14 percent year-over-year, driven by continued strength of newer franchise relationships.