Discover posts $350m Q4 net income

Source: Discover Financial Services

Discover Financial Services (NYSE:DFS) today reported net income for the fourth quarter of 2010 of $350 million, as compared to net income of $353 million for the fourth quarter of 2009.

The results for the prior year included approximately $285 million (after tax) related to the Visa/MasterCard antitrust litigation settlement.

Full year 2010 net income was $765 million, as compared to $1.3 billion for the full year 2009 which included $1.2 billion (after-tax) related to the Visa/MasterCard antitrust litigation settlement.

Fourth Quarter Highlights

* Discover card sales volume was $23 billion in the quarter, an increase of 6% from the prior year.
* Net interest margin of 9.28% improved 12 basis points as compared to the prior quarter, reflecting the sale of lower yielding federal student loans.
* Credit performance continued to improve, with net charge-offs down $103 million from the prior quarter and a net charge-off rate for the fourth quarter of 6.58%. The delinquency rate for loans over 30 days past due was 3.89%, with delinquent balances declining $181 million in the quarter.
* The outlook for continuing improvement in credit performance led to a $414 million release of loan loss reserves.
* Payment Services processed record transaction volume in the quarter of $40.4 billion with profit before tax up 32% from the prior year.
* Deposit balances originated through direct-to-consumer and affinity relationships grew $1.5 billion in the quarter to $20.6 billion.

"The sustained and significant improvement in the credit performance of the Discover card portfolio led to another very strong earnings performance this quarter," said David Nelms, chairman and chief executive officer of Discover. "We continue to invest in marketing and business development in all of our businesses, which contributed to another quarter of growth in Discover Card spending, as well as record transaction volumes in our third-party credit and debit network businesses. We look forward to capitalizing on the opportunities ahead of us in 2011, including our acquisition of The Student Loan Corporation as we strengthen our competitive position in private student loans."

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