Discover beats expectations with $261 million profit

20/09/2010 - 13:19

NEW YORK (Reuters) - Discover Financial Services reported quarterly profit of $260.6 million on Monday, widely beating expectations and sending its shares up in premarket trading, as credit quality improved and consumers spent more on their credit cards.

The credit card lender and transaction processing network reported profit of 47 cents per share, compared to the 38 cents per share that analysts expected on average, according to Thomson Reuters I/B/E/S.

Discover's profit fell 55 percent from $577.4 million, or $1.07 per share, a year earlier for the third quarter ended on August 31.

But the year-earlier results included an after-tax gain of $287 million related to an antitrust settlement with Visa and MasterCard .

Chief Executive David Nelms attributed the company's results to continuing "very positive credit trends." He also said in the earnings announcement that consumer spending on Discover cards "continued to grow nicely this quarter."

The Riverwoods, Illinois-based company said consumers spent about $24 billion on its cards during the quarter, a 5 percent increase from a year earlier.

Losses on those cards also continued to improve, with net charge-offs falling to 7.18 percent from 7.97 percent in the second quarter. Discover released $187 million in loan loss reserves for the quarter.

The company's shares closed at $15.57 on Friday, but initially rose more than 5 percent in premarket trading before falling back to trade up 1.6 percent on Monday.

(Reporting by Maria Aspan, editing by Dave Zimmerman)