Reports that came from Discover Financial Services surpassed expectations of their quarterly profit and saw a rise of above four percent in their shares. The result was due to the falling of charge-offs and more spending on credit cards by customers.
On Monday the credit card lending as well as transaction processing firm reported their quarterly profit in the tune of two hundred and sixty decimal six million dollars which is forty seven cents for each share. It surpassed analyst`s expectations of thirty eight cents per share.
According to David Nelms, chief executive of Discover, due to a positive trend in credit cards the company has recorded that profit and he further added saying to ina press release that in the present quarter spending on Discover cards by customers grew continuously.
On the other hand Discover, like other credit card firms struggled to get new customers seeking loans. The firm saw a decline in their portfolio of credit cards which came down by two decimal nine billion dollars from previous year`s forty five decimal two billion dollars. Total figures in loans fell by two percent from the previous year`s fifty decimal one billion dollars.
Discover is trying hard to achieve growth from other financial services and lending which include student loans. On Friday Discover announced that it is going to invest in the tune of six hundred million dollars in Citigroup Inc`s private loans and student loans sections.
In striking the deal Discover will add an amount of four decimal two billion dollars worth loans and other related assets to its portfolio. In a regulatory filing done on Monday the firm stated that it has expectations of bagging three hundred thousand new consumers with the new portfolio and in the process will get opportunity to sell them different financial services and products.
Analysts are not that hopeful about this, they are skeptical about the firm`s ability to sell credit cards to new student loan clients.
Michael Taiano, an analyst working in Sandler O`Neill stated that he feels it won`t be that easy as many companies in the past have failed to do it successfully.
According to him from a strategic point of view the deal was rational since Discover wants to grow in this kind of business and they never had this type of platform for doing so. The firm, striking the deal achieves a bigger scale at a very sensible price.
On Monday morning, Discover shares traded, up by four decimal six percent at sixteen dollars twenty nine cents.