Discover Financial Services Surpasses Q2 Earnings Expectations

Discover Financial Services DFS pleasantly surprised investors with its second-quarter financial results released on Wednesday. The company’s earnings per share came in at $6.06, outperforming the estimated $3.07 per share. Discover also reported a quarterly Net Interest Income (NII) of $3.524 billion, showcasing significant growth from the previous year. The increase in NII was primarily driven by higher average receivables and net interest margin expansion, which saw a year-over-year increase of 11%.

Notable highlights from the report include a 11.17% net interest margin, marking an 11 basis points improvement from the prior year. Card yield also saw a positive growth, reaching 15.99%, up by 85 basis points year-over-year. Despite some challenges such as higher interest charge-offs impacting the figures, Discover maintained a solid performance with interest expense as a percent of total loans increasing by 71 basis points from the prior year period.

Michael Shepherd, Discover’s Interim CEO and President, expressed satisfaction with the company’s performance, emphasizing strong loan growth, margin expansion, and increased non-interest revenue in the quarter. Discover also made significant strides in various strategic initiatives, including agreements to sell student loan assets, resolving litigation issues, and settling a card misclassification matter. Investors have responded positively to Discover’s results, with its shares showing a 5.01% rise after-hours following the earnings announcement.