Morgan Stanley reported Friday that its Discover credit card unit had net income of $196 million during the quarter ending August 31, a 14% decline from last year. MS says the depressed results are primarily due to higher net charge-offs partially offset by increases in net interest income, and merchant and cardholder fees. Managed credit card loans rose to $49.7 billion at quarter end, an increase of $4.9 billion, or 11%, from a year ago. The interest rate spread widened 79 basis points over the same period, as a result of the decline in interest rates that began in the first quarter. Merchant and cardholder fees rose 3% to $674 million. Transaction volume increased 6% from the third quarter of 2000 to $23.3 billion. The credit card net charge-off rate increased to 5.79%, 161 basis points higher than a year ago. The over-30-day delinquency rate was 6.31% compared to 5.47% a year ago. The increase in the charge-off rate reflected continued weakness in the U.S. economy and the adverse impact of the seasoning of cardholder accounts and a high level of national bankruptcy filings. Discover opened over 1 million new cardholder accounts during the quarter.
DISCOVER CARD PORTFOLIO SNAPSHOT
3Q/00* 4Q/00* 1Q/01* 2Q/01* 3Q/01*
Receivables: $44.8b $47.1b $49.5b $50.2b $49.7b
Volume: $21.9b $22.8b $24.4b $23.5b $23.3b
Accounts: 41.4m 42.6m 43.7m 44.7m 45.4m
Actives: 23.1m 23.8m 24.0m 24.3m 24.0m
Chargeoffs: 4.18% 4.57% 4.79% 4.98% 5.79%
Delinquency: 5.47% 5.92% 6.34% 5.84% 6.31%
Yield: 14.05% 14.13% 13.66% 13.34% 13.34%
*3Q/00 fiscal quarter ended 8/31/00; 4Q/00 fiscal quarter ended 11/30/00; 1Q/01 fiscal quarter ended 2/28/01; 2Q/01
fiscal quarter ended 5/31/01; 3Q/01 fiscal quarter ended 8/31/01.
Source: CardData (http://www.carddata.com)