Discover reported a mixed bag of metrics for the second quarter (Q2/14) showing growth in credit card outstandings and volume, but rising delinquency and flat charge-offs. However, Discover’s interest yield on its U.S. credit card business edged up from the year ago quarter.
Discover’s U.S. credit card loans grew 6% year-on-year (Y/Y) to $52.7 billion, compared to $50.9 billion in the prior quarter (Q1/14) and $49.0 billion in year ago quarter (Q2/13). The 6% growth rate is impressive as the other four major Visa and MasterCard bank credit card issuers reported very sluggish growth in outstandings for the second quarter.
According to CardData, Chase posted the strongest gain of 1.4% Y/Y and Capital One (COF) came in second place with a 1.0% Y/Y gain. Bank of America (BofA) and Citibank (Citi) posted Y/Y declines of 1.7% and 2.9%, respectively.
Discover’s gross dollar volume (GDV) rose 6% to $31.7 billion, compared to $28.1 billion in Q1/14 and $29.7 billion in Q2/13. Purchase dollar volume (PDV) rose 5% to $29.3 billion, compared to $25.7 billion in prior quarter and $27.6 billion in the year ago quarter. While solid growth in volume, Discover trails the big four who increased 8.9% Y/Y.
Discover’s credit card delinquency rate (30 + days) rose to 1.63% from 1.58% for Q2/13, but down sequentially by nine basis points (bps). Late stage delinquency (90+ days) remained flat Y/Y at 80 basis points but down seven bps from the prior quarter.
Charge-offs were relatively flat compared to the prior quarter and the year ago quarter. For Q2/14 charge-offs (net principal) stood at 2.33%, compared to 2.32% for Q1/14 and 2.34% for Q2/13.
Discover’s interest yield for its U.S. credit card business rose to 12.10% for the second quarter, compared to 12.14% in the prior quarter and 11.97% for Q2/13.
Discover also reported its Payment Services pretax income was $31 million in Q2/14, up $52 million from the prior year. The second quarter of 2013 had total pretax charges of $55 million, including a $15 million increase in loan loss provisions, related to supporting Diners Club International franchises in Europe.
Also, Payment Services dollar volume was $50.9 billion for the second quarter of 2014, up 3% from the prior year. PULSE transaction dollar volume was up 4% year-over-year.
RAM Research projects Discover’s credit card outstandings will slightly top $53 billion in the third quarter.
For more data on Discover access CardData®. For information and commentary on Discover visit the searchable CardFlash® Library of more than 58,000 articles published since 1995. Custom RAM Research® projects on Discover are available exclusively through CardWeb.com.®
Delinquency Rate (Over 30 Days) represents loans delinquent over thirty days divided by ending loans (total or respective loans, as appropriate).
Delinquency Rate (Over 90 Days) represents loans delinquent over ninety days divided by ending loans (total or respective loans, as appropriate).
Gross Principal Charge-off Rate represents gross principal charge-off dollars (annualized) divided by average loans for the reporting period.
Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period.