Discover Financial Services has reported a 33% decrease in its third-quarter profit due to an increase in credit card write-offs and a larger provision for future loan losses, leading to an immediate drop in share value – the greatest drop ever experienced over two months ago.
Net income for the quarter was $683 million, or $2.59 per share, falling short of analysts surveyed by Bloomberg who projected $3.17 per share as an estimate.
“We are seeing some indications of stress,” with credit cards showing increasing delinquencies and higher loan balances, Chief Financial Officer John Greene said on a conference call Thursday. Chief Financial Officer John Greene indicated signs of financial stress.
Discover’s shares were down 6.1% at $86.21, marking an 11% annual decline. Discover also experienced an increased net write-off ratio ranging from 1.71% in its third quarter of 2013 to 3.52% this time around, as well as more than doubling of credit losses provision at $1.7 billion.
Discover is currently caught up with regulators over the misclassification of certain credit cards that led to overcharges. Resolving this issue will likely take multiple quarters.
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