Reuters: Global Markets: Discover Financial profit beats, foreign shores beckon

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Discover Financial profit beats, foreign shores beckon Mar 21st 2012, 22:01 By Jochelle Mendonca Wed Mar 21, 2012 6:01pm EDT (Reuters) - Discover Financial Services' (DFS.N) quarterly profit handily beat Wall Street expectations for the eighth straight quarter, as more Americans used its credit cards, and the company said it is speeding up its expansion into international markets. While larger rival American Express (AXP.N) has a strong credit card brand in international markets, Discover is just beginning to take its brand beyond U.S. shores. Earlier this month, the company said it signed an agreement with Diners Club Ecuador to issue Discover cards in that country. "We believe it will allow us to market test a model that could eventually become a framework for expanding Discover branded card issuance into additional countries with what to-date has been a purely domestic model," Chief Executive David Nelms said on the post-earnings conference call. Like American Express, Discover lends directly to consumers and also competes with Visa Inc (V.N) and MasterCard Inc (MA.N) to process transactions for banks. In March, the company also signed a deal with National Payments Corporation of India which processes transactions in India. The moves make Discover less heavily dependent on the U.S. consumer to grow profits in the future. In the first quarter, Discover's credit card loans grew $1.6 billion to $45.9 billion in the quarter and total loans, including private student loans, grew 9 percent to $56.3 billion. Transaction volume for the payment services segment grew 8 percent to $46.7 billion. Along with growing consumer loan balances and transaction volumes, Discover also saw bad debts fall in the first quarter -- signaling better times for the U.S. consumer. The credit card lender and payment processing network set aside $152 million to cover future bad debt, down 64 percent from a year ago. Delinquency rates for loans over 30 days past due was 2.22 percent, down 137 basis points. But the company said it may have to increase its provision for loan losses later in 2012 as its loan balances increase. The company earned $624 million, or $1.18 a share, up from $459 million, or 84 cents a share, a year ago. Analysts expected the company to earn 94 cents a share, excluding items, according to Thomson Reuters I/B/E/S. Earlier this month, Discover announced a $2 billion share buy-back program after the U.S. Federal Reserve gave it the green light for its capital program. The Riverwoods, Illinois-based company's shares, which have gained more than 40 percent in the last one year, closed at $31.64 on Wednesday on the New York Stock Exchange. (Reporting by Jochelle Mendonca in Bangalore; Editing by Joyjeet Das) Link this Share this Digg this Email Reprints

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