Discover Financial Services (DFS) saw a rise in its shares today following a strong second-quarter earnings report surpassing expectations. The company revealed GAAP earnings of $6.06 per share, exceeding the estimated $3.07 per share, along with a quarterly Net Interest Income (NII) of $3.524 billion. Analyst Jon G. Arfstrom from RBC Capital Markets suggests that Discover’s performance is likely to be impacted by its upcoming merger with Capital One Financial Corporation (COF) and strategic initiatives taken independently. Discover is streamlining operations, focusing on consumer banking, divesting student lending, and managing credit costs, as noted by the analyst in a recent report.
Looking forward, Discover Financial now anticipates an FY24 margin ranging between 11.1% to 11.4%, higher than the initial projection of 10.7% to 11.0%. The sale of its $10.1 billion private student loan portfolio to investment vehicles managed by The Carlyle Group Inc. and KKR & Co. Inc. at a premium of around 7% indicates positive developments for the company according to Arfstrom. The analyst predicts that management will narrow its guidance range further as 2024 progresses, while the buyback remains delayed due to the impending merger with Capital One. DFS shares are currently trading at $141.81, up by 0.28%, showcasing a somewhat bullish sentiment in the market.
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