Discover Financial Services (DFS, Financial) released its Q3 2023 earnings report on October 18, 2023. The company reported a net income of $683 million or $2.59 per diluted share, a decrease from the $1.0 billion or $3.56 per diluted share reported in Q3 2022. Despite the drop in net income, DFS experienced a 17% growth in both total loans and total revenue net of interest expense.
Financial Performance and Highlights
DFS's total loans at the end of the period stood at $122.7 billion, a 17% increase from $104.9 billion in the same period last year. The total revenue net of interest expense was $4,044 million, up 17% from $3,468 million in Q3 2022. However, the total net charge-off rate increased to 3.52% from 1.71% in Q3 2022, a rise of 181 basis points.
John Owen, Discover’s interim CEO and President, commented on the results, stating,
The quarter was characterized by strong growth in revenues, receivables and deposits, while credit continued to season with charge-offs within expected ranges. These results underscore the strength of our business model, the power of our brand, and our commitment to providing best-in-class customer service while enhancing our compliance and risk management capabilities, which remains our top priority."
Segment Results
The Digital Banking segment reported a pretax income of $803 million for the quarter, $471 million lower than the prior year period. This was due to a higher provision for credit losses and higher operating expenses, partially offset by increased revenue net of interest expense. The Payment Services segment reported a pretax income of $85 million, up $32 million year-over-year, primarily driven by increased PULSE revenue.
Dividend Declaration and Future Outlook
The Board of Directors declared a quarterly cash dividend of $0.70 per share of common stock, payable on December 7, 2023, to holders of record at the close of business on November 22, 2023. Despite the challenges, DFS remains committed to its growth strategy and enhancing its risk management capabilities.
For more detailed financial information, please refer to the financial supplement filed as Exhibit 99.2 to the company's Current Report on Form 8-K filed today with the Securities and Exchange Commission (“SEC”).
