Morgan Stanley reported this morning that its Credit Services division, including the “Discover Card,” posted lower net income for the third quarter compared to 3Q/02. Net income of $185 million was off 11.5% compared to one-year ago and down 4.6% compared to second quarter 2003 profits of $194 million. However, third quarter profits were up $3 million over 1Q/03 net income. Managed credit card loans at the end of the third quarter end rose 60 basis points to $49,965,000,000. The interest rate spread was unchanged at 8.91%, but the interest yield declined 92 basis points. Transaction volume rose 2% from a year ago, to $24.8 billion, driven by a 6% increase in sales. Account growth was flat, but active accounts declined more than 6% from 3Q/02. MS reports that merchant and cardholder fees were essentially unchanged at $523 million as higher merchant discount fees from increased transaction volume were offset by lower cardholder late fees. The managed credit card net charge-off rate increased to 6.90%, 83 basis points above a year ago, and 40 basis points above last quarter. The over-30-day delinquency rate was 6.05%, 33 basis points above last year but 16 basis points below last quarter. MS says sustained high levels of U.S. bankruptcy filings and unemployment along with changes in the Company’s account re-aging policy, which tightened terms under which delinquent accounts are returned to a current status, negatively affected the charge-off and delinquency rates. For complete details on Discover’s third quarter performance visit CardData (www.carddata.com).
DISCOVER CARD PORTFOLIO SNAPSHOT
3Q/02* 4Q/02* 1Q/03* 2Q/03* 3Q/03* Y/Y CHNG
Outstandings:$49.7b $51.1b $51.8b $50.9b $50.0b +0.6%
Volume: $24.3b $25.3b $26.1b $24.0b $24.8b +2.0%
Accounts: 46.2m 46.5m 46.5m 46.4m 46.3m +0.2%
Actives: 22.8m 22.6m 22.3m 21.8m 21.3m -6.6%
Chargeoffs: 6.07% 5.96% 6.17% 6.50% 6.90% +83bps
Delinquency: 5.72% 5.96% 6.33% 6.21% 6.05% +33bps
Yield: 12.86% 12.45% 11.78% 11.97% 11.94% -92bps
2Q/02 ended 5/31/02; 3Q/02 ended 8/31/02; 4Q/02 ended 11/30/02; 1Q/02 ended 2/28/03;
2Q/03 ended 5/31/03; 3Q/03 ended 8/31/03.
Source: CardData (www.carddata.com)