Discover Financial 2Q net income falls, revenue up

Associated Press Modified: June 19, 2012 at 9:30 am •  Published: June 19, 2012

RIVERWOODS, Ill. (AP) — Discover Financial Services said Tuesday that its second-quarter net income fell 10 percent as the company freed up less money from reserves set aside to cover customers' unpaid bills.

But late payment rates and customers' loan defaults dropped sharply. The economic shakeout of the last few years has left credit cards in the hands of more affluent consumers who are better able to pay their bills in full each month, while those with lower credit scores and presumably less ability to pay are now less likely to use credit. Tighter underwriting standards also have pushed loss rates lower.

After paying preferred stockholders, Discover earned $532 million, or $1 per share, for the three months ended May 31. That compares with $593 million, or $1.09 per share, a year ago. Analysts polled by FactSet expected a profit of 99 cents per share.

The Riverwood, Ill., company freed up $110 million set aside to help cover customers' unpaid bills. Last year, Discover released $401 million from its reserve. The company's total provision for loan losses grew 32 percent to $232 million, saying it set aside more money as it made more loans.

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