Discover continues to outpace the top Visa and MasterCard issuers with solid growth in fourth quarter outstandings. However, Discover’s gross dollar volume (GDV) rose 4.4% to $33.2 billion, below the average for the Big 4 Visa and MasterCard issuers.
Discover’s U.S. end-of-period (EOP) credit card loans grew 4.9% year-on-year (Y/Y) to $56.1 billion, compared to $53.7 billion in the prior quarter (Q3/14) and $53.5 billion in year ago quarter (Q4/13).
Discover’s GDV rose 4.4% to $33.2 billion, compared to $32.1 billion in Q3/14 and $31.8 billion in Q4/13. Purchase dollar volume (PDV) rose 4.8% to $30.9 billion, compared to $29.6 billion in prior quarter and $29.5 billion in the year ago quarter.
Discover’s total credit card delinquency rate rose 5 basis points (bps) from the prior quarter and up 2 bps from the year-ago quarter to 2.58%. Delinquency (30 + days) rose to 1.73% from 1.72% for Q4/13, and up sequentially by 2 bps. Late stage delinquency (90+ days) increased slightly Y/Y at 85 basis points, up 3 bps from the prior quarter and 1 bps from the year ago quarter.
Charge-offs inched up 4 bps compared to the prior quarter and up 4 bps from the year ago quarter. For Q/14 charge-offs (gross principal) stood at 3.03%, compared to 2.99% for Q3/14 and 2.99% for Q4/13.
Discover’s interest yield for its U.S. credit card business increased to 12.08% for the fourth quarter, compared to 12.04% in the prior quarter and 12.08% for Q4/13.
Discover Financial Services reported net income of $404 million for the fourth quarter of 2014, as compared to $602 million for the fourth quarter of 2013.
Discover also reported Payment Services pretax income was $2 million in the quarter, down $24 million from the prior year primarily due to a $21 million fair value adjustment resulting from classifying Diners Club Italy as held-for-sale.
Payment Services dollar volume was $51.0 billion for the fourth quarter of 2014, up 2% from the prior year. PULSE transaction dollar volume was up 4% year-over-year. Network Partners volume was down $350 million, or 13% from the prior year due to the previously communicated loss of volume from a third party payments partner which was partially offset by AribaPay volume.
RAM Research projects Discover’s credit card outstandings will seasonally slightly decline to $55 billion in the first quarter.
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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.