Showing posts with label Discover Financial. Show all posts
Showing posts with label Discover Financial. Show all posts

Discover® U.S. Spending Monitor Falls 1.5 Points in March



http://www.discoverfinancial.com

After Rising 2.3 points in February,  (see related stories below) Discover's U.S. Spending Monitor sees a 1.5 point regression in March

Families Show Decline in Economic Confidence, but Discretionary Spending Intent Slowly Rises

RIVERWOODS, Ill.--(BUSINESS WIRE)--Consumer confidence slipped in March after back-to-back gains the previous two months, led by married couples with children at home expressing a significant decline in confidence, according to the Discover U.S. Spending Monitor for March 2010.
“Since January, consumers have slightly altered their spending behavior”
Overall, the Discover U.S. Spending Monitor – a poll of 8,200 consumers that tracks consumer confidence and spending intentions on a daily basis – fell 1.5 points in March to 85 (based out of 100). Overall, 49 percent of consumers felt economic conditions were worsening in March, 3 points worse than February. The number of consumers who felt their finances were getting worse also climbed 1.5 points.
The decline in confidence was most prevalent among families. Married couples with children at home showed a 6-point increase in the number who felt economic conditions were worsening. They also showed a 3-point increase in the number who felt their finances were getting worse.
Despite the more pessimistic economic and financial attitudes, the Monitor reported a positive trend toward discretionary spending intent. For the second straight month and only the second time since May 2009, less than 50 percent of consumers plan to cut discretionary spending in the month ahead. And while a majority of consumers plan to keep spending the same in the month ahead, the number of consumers planning to increase discretionary spending has slowly risen since the beginning of the year.
Consumers Indicating Slow Increase in Discretionary Spending, but 57% Percent Plan to Keep Spending the Same
March saw a Monitor-high 57 percent of consumers planning to keep their spending flat in the month ahead, tying last month’s record. But consumers are beginning to think about increasing their discretionary spending. Over the last three months, consumers said they planned to increase spending in the following categories:
  • Going out to dinner or the movies (up from 6 to 8 percent planning to increase their spending)

  • Making home improvement purchases (up from 12 percent to 14 percent planning to increase spending)

  • Spending on vacations or furthering their education (increased from 10 percent to 12 percent planning to increase spending)

Plans to change saving and investing levels stayed flat in March, with 9 percent planning to save and invest more, unchanged from February. And despite a rise in gasoline prices, only 26 percent of consumers anticipated spending more on gas, groceries or their mortgages, also unchanged from last month.
“Since January, consumers have slightly altered their spending behavior,” said Julie Loeger, senior vice president of brand and product management for Discover Financial Services. “More people are planning to increase their discretionary spending – or at least keep it the same – than those who say they plan to spend less. This is the opposite of what we saw for most of 2009 and the beginning of 2010.”
Nearly 40 Percent Expecting an Income Shortfall in the Month
After reaching a Monitor-low 35 percent in February’s survey, the Monitor showed a 4-percent jump in March to 39 percent in the number of consumers expecting an income shortfall in the month ahead.
Families showed an even bigger jump, as 42 percent of married couples with children at home said they expected an income shortfall in the month ahead, a 5-percent increase from last month.
Consumers also had more difficulty balancing their budgets in March than they did in February. Just 46 percent expected to have money left over after paying monthly bills, a 2-point decline from February. It has been a year since the Monitor has showed a majority of consumers having money left over. However, of those consumers who do have money left over, 81 percent plan on having the same or more money left over than the previous month, a 2-point increase from February.
57% Rate the Economy as Poor; Just 32% Rate Their Finances Good or Excellent
A solid majority of consumers, 57 percent, continue to rate the economy as poor. This number was unchanged from February. However, families share a more pessimistic view than the overall population, as 62 percent of married people with children currently rate the economy as poor, an increase of 3 points from February.
Just 32 percent of consumers rated their finances as good or excellent, 1-point lower than last month’s reading. Families, once again, were more pessimistic about their finances than the overall population. Only 31 percent rate their finances as good or excellent, down 2 percent from February.
“Despite consumer spending stabilizing and even showing signs of a slight increase, consumers are still concerned about the economy and their own household finances,” said Loeger. “With families feeling some budgetary pressures, the positive trends we have recently seen in terms of spending may be short-lived.”
For more Discover U.S. Spending Monitor survey data, charts and information, please visit www.discoverfinancial.com/surveys/spending.shtml.
About Discover U.S. Spending Monitor
The Discover® U.S. Spending MonitorSM is a monthly index of consumer spending intentions and capacity that is based on interviews with a random sample of 8,200 U.S. adults conducted at a rate of 275 per night. In addition to spending, the survey asks consumers their opinions on the U.S. economy and their personal finances. The Monitor began in May 2007 with a base index of 100. Surveys are conducted by Rasmussen Reports, an independent survey research firm (www.rasmussenreports.com).
About Discover
Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discoverfinancial.com.

Contacts

Matthew Towson

Discover

224-405-5649

matthewtowson@discover.com
Permalink: http://www.businesswire.com/news/home/20100407005302/en/Discover%C2%AE-U.S.-Spending-MonitorSM-Falls-1.5-Points


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Discover® U.S. Spending Monitor Falls 1.5 Points in March



http://www.discoverfinancial.com

After Rising 2.3 points in February,  (see related stories below) Discover's U.S. Spending Monitor sees a 1.5 point regression in March

Families Show Decline in Economic Confidence, but Discretionary Spending Intent Slowly Rises

RIVERWOODS, Ill.--(BUSINESS WIRE)--Consumer confidence slipped in March after back-to-back gains the previous two months, led by married couples with children at home expressing a significant decline in confidence, according to the Discover U.S. Spending Monitor for March 2010.
“Since January, consumers have slightly altered their spending behavior”
Overall, the Discover U.S. Spending Monitor – a poll of 8,200 consumers that tracks consumer confidence and spending intentions on a daily basis – fell 1.5 points in March to 85 (based out of 100). Overall, 49 percent of consumers felt economic conditions were worsening in March, 3 points worse than February. The number of consumers who felt their finances were getting worse also climbed 1.5 points.
The decline in confidence was most prevalent among families. Married couples with children at home showed a 6-point increase in the number who felt economic conditions were worsening. They also showed a 3-point increase in the number who felt their finances were getting worse.
Despite the more pessimistic economic and financial attitudes, the Monitor reported a positive trend toward discretionary spending intent. For the second straight month and only the second time since May 2009, less than 50 percent of consumers plan to cut discretionary spending in the month ahead. And while a majority of consumers plan to keep spending the same in the month ahead, the number of consumers planning to increase discretionary spending has slowly risen since the beginning of the year.
Consumers Indicating Slow Increase in Discretionary Spending, but 57% Percent Plan to Keep Spending the Same
March saw a Monitor-high 57 percent of consumers planning to keep their spending flat in the month ahead, tying last month’s record. But consumers are beginning to think about increasing their discretionary spending. Over the last three months, consumers said they planned to increase spending in the following categories:
  • Going out to dinner or the movies (up from 6 to 8 percent planning to increase their spending)

  • Making home improvement purchases (up from 12 percent to 14 percent planning to increase spending)

  • Spending on vacations or furthering their education (increased from 10 percent to 12 percent planning to increase spending)

Plans to change saving and investing levels stayed flat in March, with 9 percent planning to save and invest more, unchanged from February. And despite a rise in gasoline prices, only 26 percent of consumers anticipated spending more on gas, groceries or their mortgages, also unchanged from last month.
“Since January, consumers have slightly altered their spending behavior,” said Julie Loeger, senior vice president of brand and product management for Discover Financial Services. “More people are planning to increase their discretionary spending – or at least keep it the same – than those who say they plan to spend less. This is the opposite of what we saw for most of 2009 and the beginning of 2010.”
Nearly 40 Percent Expecting an Income Shortfall in the Month
After reaching a Monitor-low 35 percent in February’s survey, the Monitor showed a 4-percent jump in March to 39 percent in the number of consumers expecting an income shortfall in the month ahead.
Families showed an even bigger jump, as 42 percent of married couples with children at home said they expected an income shortfall in the month ahead, a 5-percent increase from last month.
Consumers also had more difficulty balancing their budgets in March than they did in February. Just 46 percent expected to have money left over after paying monthly bills, a 2-point decline from February. It has been a year since the Monitor has showed a majority of consumers having money left over. However, of those consumers who do have money left over, 81 percent plan on having the same or more money left over than the previous month, a 2-point increase from February.
57% Rate the Economy as Poor; Just 32% Rate Their Finances Good or Excellent
A solid majority of consumers, 57 percent, continue to rate the economy as poor. This number was unchanged from February. However, families share a more pessimistic view than the overall population, as 62 percent of married people with children currently rate the economy as poor, an increase of 3 points from February.
Just 32 percent of consumers rated their finances as good or excellent, 1-point lower than last month’s reading. Families, once again, were more pessimistic about their finances than the overall population. Only 31 percent rate their finances as good or excellent, down 2 percent from February.
“Despite consumer spending stabilizing and even showing signs of a slight increase, consumers are still concerned about the economy and their own household finances,” said Loeger. “With families feeling some budgetary pressures, the positive trends we have recently seen in terms of spending may be short-lived.”
For more Discover U.S. Spending Monitor survey data, charts and information, please visit www.discoverfinancial.com/surveys/spending.shtml.
About Discover U.S. Spending Monitor
The Discover® U.S. Spending MonitorSM is a monthly index of consumer spending intentions and capacity that is based on interviews with a random sample of 8,200 U.S. adults conducted at a rate of 275 per night. In addition to spending, the survey asks consumers their opinions on the U.S. economy and their personal finances. The Monitor began in May 2007 with a base index of 100. Surveys are conducted by Rasmussen Reports, an independent survey research firm (www.rasmussenreports.com).
About Discover
Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discoverfinancial.com.

Contacts

Matthew Towson

Discover

224-405-5649

matthewtowson@discover.com
Permalink: http://www.businesswire.com/news/home/20100407005302/en/Discover%C2%AE-U.S.-Spending-MonitorSM-Falls-1.5-Points


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Discover Financial Services Reports First Quarter Results: Net Loss of $104 Million or $0.22 Per Share

Results include the recently announced addition to loss reserves of $305 million


RIVERWOODS, Ill.--(BUSINESS WIRE)--Discover Financial Services (NYSE: DFS) today reported a net loss for the first quarter of 2010 of $104 million, as compared to net income of $120 million for the first quarter of 2009. Results for the first quarter of 2010 included a pre-tax addition to loan loss reserves of $305 million ($185 million after tax), which brings the company’s reserve coverage to approximately 12 months of losses. Net income for the first quarter of 2009 included approximately $297 million (after tax) related to the Visa/MasterCard antitrust litigation settlement.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations”
The company has received regulatory approval to redeem the $1.2 billion of preferred stock that it issued to the U.S. Treasury under the TARP Capital Purchase Program. Prior to such redemption, Discover Bank will issue $350 million of tier 2 qualifying capital in the form of subordinated debt. The subordinated debt offering is expected to be completed during the second quarter, subject to market conditions.



First Quarter Highlights

  • Discover card sales volume increased 5% from the prior year to $22 billion.

  • Loans were approximately $50 billion. The student loan portfolio grew $2 billion from the prior year, while credit card loans decreased $3 billion.

  • The first-quarter net charge-off rate was 8.51%, and the over 30 days delinquency rate was 5.05%.

  • Expenses were down 15% from the prior year.

  • Payment Services segment profit before tax was up 28% to $37 million, and transaction volume was $36 billion, a 2% increase from the prior year.

  • Deposit balances originated through direct-to-consumer and affinity relationships were $14.8 billion, an increase of $2.3 billion from the prior quarter.

"Discover's performance this quarter reflects the emergence of a more favorable economic environment, as our Discover card sales volume has now shown four consecutive months of year-over-year growth and delinquency levels have declined," said David Nelms, chairman and chief executive officer of Discover. "We were also pleased with the continued strong growth of our direct-to-consumer deposit business."

"Our reserve addition this quarter is consistent with our conservative balance sheet management approach," Nelms added. "By continuing to strengthen our foundation and invest in the Discover franchise, we believe we are well-positioned to deliver on our strategy of becoming the leader in direct banking and payment services, particularly as the U.S. economy improves."



Segment Results:

The company manages its business activities in two segments: Direct Banking and Payment Services. The company changed the names of its segments to better reflect the nature of products and services included in each.

Beginning with the first quarter of 2010, the trusts used in securitization activities are included in the company’s results1. In order to provide more meaningful historical comparisons for analyzing data, schedules have been prepared to reflect the results for 2009 on an “as adjusted” basis. The as adjusted basis assumes that the trusts used in the company’s securitization activities were consolidated into the financial results for 2009. The as adjusted basis also excludes from results income received in connection with the company’s settlement of its antitrust litigation with Visa and MasterCard for each quarter of 2009 and the income statement impact of the Morgan Stanley special dividend agreement dispute in the fourth quarter of 2009.



Direct Banking

The table below reconciles all numbers in the discussion that follows that would be reflected differently on an as reported basis. The discussions that follow will compare the first quarter of 2010 to 2009 on an as adjusted basis2.




























   

   

   







Quarter Ended









Quarter Ended






February 28, 2009









February 28, 2009






Managed - As Reported     Adjustments     As Adjusted


















 
Credit Card Interest Yield



12.28%



0.09%



12.37%
Net Yield on Loan Receivables



9.11%



0.08%



9.19%
Other Income



$863



($376)



$487
Provision for Loan Losses



$1,334



$143



$1,477
Income Before Taxes



$167



($509)



($342)


















 
Allowance for Loan Losses



$1,879



$1,523



$3,402
Reserve Rate



6.70%



(0.01%)



6.69%


















 






Quarter Ended









Quarter Ended






November 30, 2009









November 30, 2009






Managed - As Reported     Adjustments     As Adjusted


















 
Credit Card Interest Yield



12.75%



0.01%



12.76%
Net Yield on Loan Receivables



9.37%



0.01%



9.38%


















 
Allowance for Loan Losses



$1,758



$2,144



$3,902
Reserve Rate



7.44%



0.23%



7.67%
 


















A pretax loss of $208 million in the first quarter of 2010 was a $135 million improvement from the first quarter of 2009, as adjusted.



Loans ended the quarter at $50 billion, down 2% compared to the prior year. Student loans grew $2 billion to $2.8 billion while credit card loans declined $3 billion to $45.8 billion. The decline in credit card loans reflects lower balance transfer activity, partially offset by increased sales volumes. Sales volume increased 5% compared to the prior year, while balance transfer volume declined 53% from the prior year as the company reduced its marketing of promotional rate balance transfer offers.



Net yield on loan receivables was 9.01%, a decrease of 18 basis points and 37 basis points from the prior year and the prior quarter as adjusted, respectively. The net yield decreased from both periods primarily due to the increase in lower rate student loan balances and higher funding costs. The interest yield on credit card loans increased 33 basis points from the prior year as adjusted and decreased 6 basis points from the prior quarter as adjusted. The increase from the prior year reflects a reduction in promotional rate balances and higher interest rates on standard balances, partially offset by higher interest charge-offs.



The net charge-off rate increased to 8.51% for the first quarter of 2010, up 203 basis points and 8 basis points from the prior year and the prior quarter, respectively. The increase in both periods reflects elevated levels of consumer bankruptcies and unemployment, partially offset by a higher mix of student loans which have a lower charge-off rate. The net charge-off rate for the second quarter of 2010 is expected to be between 8.0% and 8.5%.



The over 30 days delinquency rate was 5.05%, an improvement of 21 basis points from the prior year and 26 basis points from the prior quarter, reflecting better overall credit trends. Based on these trends, the company believes that the amount of delinquent loan balances may have peaked in the fourth quarter of 2009.



Provision for loan losses decreased $90 million, or 6%, from the prior year as adjusted, due to a lower reserve build, partially offset by higher net charge-offs. The allowance for loan losses increased $805 million from the prior year as adjusted, and $305 million from the prior quarter as adjusted. The reserve rate increased to 8.40%, up 171 basis points and 73 basis points from the prior year and prior quarter as adjusted, respectively. The reserve addition in the quarter was a result of a new analytical process that enhances management’s ability to estimate incurred losses on non-delinquent accounts, which brings the company’s reserve coverage to approximately 12 months of losses.



Other income decreased $6 million from the prior year as adjusted, primarily due to the discontinuance of overlimit fees beginning in February 2010 and a decline in merchant fees, partially offset by higher discount and interchange revenue reflecting higher sales volume.



Expenses were down $81 million, or 15% from the prior year, reflecting the impact of cost containment initiatives and lower marketing expense, as well as a $23 million benefit related to the settlement of the Morgan Stanley special dividend agreement dispute.  

Payment Services

Pretax income of $37 million in the quarter was up $8 million, or 28%, from the prior year. Revenues were up $5 million, reflecting an increase in the number of transactions and higher margin volume on the PULSE network and lower incentive payments. Expenses were down $3 million.

Payment Services dollar volume of $36 billion for the first quarter was up 2% from the prior year. Third-Party Issuer dollar volume was up 15% from the prior year and Diners Club dollar volume was up 4%. The dollar volume on the PULSE network increased 1% and number of transactions increased 5% to 720 million due to increased volume from new and existing clients.



Capital/Dividends

The company’s board declared a cash dividend of $0.02 per share of common stock, payable on April 22, 2010, to stockholders of record at the close of business on April 1, 2010. Capital increased $34 million as a result of the settlement of the Morgan Stanley special dividend agreement dispute.



Conference Call and Webcast Information

The company will host a conference call to discuss its first quarter results on Tuesday March 16, 2010, at 4:00 p.m. Central time. Interested parties can listen to the conference call via a live audio webcast at http://investorrelations.discoverfinancial.com.



About Discover

Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discoverfinancial.com.



A financial summary follows. Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the financial supplement filed as Exhibit 99.2 to the company’s Form 8-K filed today with the Securities and Exchange Commission (“SEC”). Both the earnings release and the financial supplement are available online at the SEC’s website (http://www.sec.gov) and the company’s website (http://investorrelations.discoverfinancial.com).

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Posted by John B. Frank Wednesday, March 17, 2010 0 comments

Discover Financial Services Announces Actions to Further Enhance Loan Loss Reserve

http://www.discoverfinancial.comRIVERWOODS, Ill.--(BUSINESS WIRE)--Discover Financial Services (NYSE:DFS) today announced that the company will record an increase in reserves of $305 million pre-tax in the first quarter 2010, which brings its reserve coverage to approximately twelve months of losses. This reserve addition results from a new analytical process that enhances management’s ability to estimate incurred losses on non-delinquent accounts.

Including the impact of the reserve addition, Discover expects to report a loss per share for the first quarter 2010 of $.22 to $.23.



Discover also estimates that the first quarter net principal charge-off rate for its Direct Banking segment will be approximately 8.5%, up from 8.43% in the fourth quarter 2009. The over 30-day delinquency rate is estimated to be approximately 5%, a reduction of approximately 25 basis points from the fourth quarter 2009. Based on current credit performance trends within its loan portfolio, the company believes that the amount of delinquent loan balances may have peaked in the fourth quarter 2009.



Discover plans to report first quarter 2010 results after the close of trading on March 16, 2010. A conference call to discuss the firm's results, outlook and related matters will be held at 5 p.m. Eastern time. The general public is invited to listen to the call by dialing 866-277-1182 (U.S. domestic) or 617-597-5359 (international) passcode 33082119, or via a live audio webcast through the Investor Relations section of the Web site. For those unable to listen to the live broadcast, a replay will be available on our Web site or by dialing 888-286-8010 (U.S. domestic) or 617-801-6888 (international), passcode 13388966, beginning approximately two hours after the event.



The replay of the conference call will be available through April 16, 2010.



About Discover

Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discoverfinancial.com.

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