A confluence of improving credit conditions nationwide and consumer sentiment about spending on those accounts drove first-quarter profits higher on a year-over-year basis for one of the nation's biggest lenders and payment processors.
Discover Financial Services recently announced that it saw profits jump 36 percent in the fiscal first quarter as consumers both slashed delinquency and default and also began to use their credit cards more often, according to a report from the Wall Street Journal. In the latter case, the amount of money consumers spent on their Discover cards climbed 7 percent on an annual basis to a total of $25.6 billion in the three-month period.
Meanwhile, the company also saw instances of late payments tumble appreciably, the report said. It released $226 million in loss reserves, down from $271 million in the first fiscal quarter of 2011. Moreover, the company saw the rate of delinquencies on its credit cards fall to 2.22 percent in the first quarter, down from the previous period's 2.39 percent, and a substantial year-over-year improvement from 3.59 percent. Its charge off rate dipped to 3.07 percent from 5.96 percent in the same quarter last year.
"Continued improvements in credit performance, solid organic growth in each of our lending products and strong volume growth across our networks were key drivers of this quarter's earnings," said David Nelms, chairman and chief executive officer of Discover, according to the newspaper.
Experts had noted that increases in consumer credit card use in recent months was likely a function of higher spending seen at the end of every year due to the holiday shopping season, but the spending trend has continued into the new year.
