Discover Financial Services (NYSE: DFS) said its fiscal fourth-quarter profit fell 19 percent as the rate of bad loans increased, joining other major lenders in reporting more losses on credit card loans, according to Associated Press.
Shares of the credit card lender fell $1.62, or 9.9 percent, to $14.80 in morning trading. The stock has ranged from $4.73 to $17.35 over the past year.
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Net income available to common shareholders for the period ended Nov. 30 was $352.1 million, or 63 cents per share, down from $432.3 million, or 92 cents per share, in the same period a year earlier. Results in the most recent quarter included a $285 million gain from the settlement of an antitrust lawsuit with Visa Inc. (NYSE: V) and MasterCard Inc. (NYSE: MA)
Analysts had been expecting earnings of 14 cents a share. Analyst estimates typically exclude one-time items.
The percentage of loans the company expects not to be repaid rose to 8.43 percent from 5.48 percent. The rate of loans 30 days or more past due edged up to 5.31 percent to 4.56 percent.
Nearly all lenders have faced mounting loan losses as customers fall behind on payments amid high unemployment. Credit-card losses traditionally mirror the unemployment rate, which currently stands at 10 percent. Discover rivals American Express Co. (NYSE: AXP) and Capital One Financial Corp. (NYSE: COF) both reported higher levels of loan losses from a year ago in their most recent quarters.
Discover's provision for loan losses, or the amount it sets aside to cover bad loans, was $989 million, down from $1.11 billion in the same quarter a year ago but up from $924.4 million in the second quarter.
On a positive note, sales volume, or the amount charged on Discover's credit cards, was relatively stable. Sales volume slipped less than 1 percent to $21.9 billion.
For the full fiscal year, Discover earned $1.24 billion, or $2.42 per share, compared with $927.8 million, or $2.20 per share, in the previous year.
Earlier this year, Discover became a bank holding company and received $1.2 billion from the federal government under the Troubled Asset Relief Program.
The company was one of hundreds of banks that received government assistance during the financial crisis. Unlike many large financial companies, however, Discover has yet to pay back the government.
Earlier this week, Wells Fargo & Co. (NYSE: WFC) and Citigroup Inc. (NYSE: C) announced stock offerings to raise the cash needed to repay the bailout loans.
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