Discover Financial (DFS)

HenryTo · Posted: Sun Dec 23, 2007 2:58 am Post subject: Discover Financial (DFS)

Motley Fool on its latest quarterly results:

http://www.fool.com/investing/value/2007/12/21/the-un-discovered-company.aspx

HenryTo · Posted: Thu Jun 16, 2011 11:40 am Post subject:

Morningstar favors DFS' strategic plans over those of COF:

HenryTo · Posted: Wed Mar 17, 2010 11:36 am Post subject:

Morningstar's latest notes on DFS. DFS believes credit losses have already turned the corner. It is also redeeming the $1.2 billion of preferred stock that it issued to the U.S. Treasury under the TARP:

HenryTo · Posted: Thu Jun 25, 2009 1:18 am Post subject:

Latest update on DFS from Motley Fool's Inside Value:

HenryTo · Posted: Wed May 27, 2009 11:04 pm Post subject:

Latest update of credit trends, courtesy of Discover Card:
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Discover sees slowdown in loan growth in H2
Wed May 27, 2009 9:48am EDT

* Sees Q2 charge-off rate at about 8 pct
* To set aside more money to cover bad loans

* Says loan growth will slow in H2 '09

* Shares down 1 pct

NEW YORK, May 27 (Reuters) - The head of Discover Financial Services (DFS.N), the fourth-largest U.S. credit card network, said he expects a rise in credit defaults in the second quarter, while loan growth is expected to slow in the second half of this year.

Discover Chief Executive David Nelms, speaking at a Sanford C. Bernstein conference, said he expects the charge-off rate -- the percentage of debt the company does not expect to be repaid -- on a managed basis, to be about 8 percent in the second quarter.

In the first quarter, Discover's charge-off rate was 6.48 percent.

The company will also continue to set aside more money to cover bad loans, Nelms said.

With default rates at record levels, credit card companies are among the latest victims of an economic crisis that began with the collapse of the U.S. housing and subprime mortgage markets and has spread around the world.

Shares of the company were down 7 cents or less than 1 percent at $8.82 in morning trade on the New York Stock Exchange.

HenryTo · Posted: Tue Mar 31, 2009 10:26 pm Post subject:

No doubt Discover Card is a very attractive "deep value" pick right now - but new legislation pending may make the credit card industry much less attractive than they have been in the past:

http://www.bloomberg.com/apps/news?pid=20601213&sid=awXUKezTGT60&refer=home

HenryTo · Posted: Fri Jan 16, 2009 12:16 pm Post subject:

Discover becomes a bank holding company, and received $1.2 billion in TARP funds:
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Discover says approved for $1.2 bln in US funds
Thu Jan 15, 2009 5:49pm EST

NEW YORK, Jan 15 (Reuters) - Discover Financial Services (DFS.N), the No. 4 U.S. credit card network, has received preliminary approval for $1.2 billion in funds under the government's bailout package, it said in a regulatory filing on Thursday.

Discover got the approval on Wednesday and plans to become a bank holding and a financial holding company, it said in the Securities and Exchange Commission filing.

Its application to become a bank holding company was approved by the Federal Reserve last month. It said its existing capital levels satisfy the definition of a "well-capitalized" bank holding company under regulatory guidelines.

Credit card companies are becoming the latest victims of a crisis that began with the collapse of the U.S. housing and subprime mortgage markets and spread around the world, battering banks and other companies as well as financial markets.

HenryTo · Posted: Tue Oct 28, 2008 12:33 am Post subject:

Discover settles with Mastercard and Visa for $2.75 billion. $1.2 billion of this should go to its former parent, Morgan Stanley (this can't come at a much better time for Morgan Stanley):
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MasterCard, Visa settle Discover suit for $2.75 billion
Monday October 27, 8:47 pm ET

By Dan Wilchins and Emily Chasan
NEW YORK (Reuters) - MasterCard Inc (NYSE:MA - News) and Visa Inc (NYSE:V - News) said they agreed to pay credit card issuer and network Discover Financial Services Inc (NYSE:DFS - News) a total of $2.75 billion to settle a lawsuit over anti-competitive practices.

The payment is big enough to potentially force Visa to issue more shares, and has triggered a lawsuit by Discover's former parent, Morgan Stanley, (NYSE:MS - News) which says it is entitled to $1.2 billion of the proceeds.

Discover sued credit card networks MasterCard and Visa in 2004 for harming its business by preventing banks that issued MasterCard and Visa cards from also offering Discover cards. Discover's lawsuit was similar to one American Express Co (NYSE:AXP - News) filed in 2004, which MasterCard settled for $1.8 billion in June and Visa settled for about $2.1 billion in November 2007.

Just before the Discover suit was scheduled to go to trial earlier this month, the companies agreed to settle. On Monday, the companies disclosed the size of the settlements and other terms.

Under the settlement agreement, Visa will pay $1.89 billion, the company said in a statement. MasterCard said it will pay $862.5 million. Discover had sought $6 billion in damages from the two companies.

Visa set aside $3 billion of proceeds from its initial public offering in March to cover some of its potential litigation expenses. With the American Express and the Discover settlements, Visa is now paying out more than $3 billion, which according to the prospectus from the company's initial public offering could spur it to issue more shares. Visa's nearly $20 billion IPO in March was the largest ever U.S. stock market debut.

LITIGATION AFTER THE LITIGATION

Discover, which was spun off from Morgan Stanley last year, has said in regulatory filings that it agreed to pay Morgan Stanley the first $700 million of proceeds it receives from a settlement, and half of any proceeds it receives above $1.5 billion, with a maximum potential payment of $1.5 billion.

But Discover said in a statement on Monday that Morgan Stanley is in breach of the agreement, and the amount it will pay to its former parent "is a matter of dispute."

Morgan Stanley said in a statement that it is due to receive $1.2 billion pre-tax from the settlement, and "there is absolutely no basis for Discover's claim that the agreement was breached." The bank said it filed a lawsuit last week in New York state court seeking a declaratory judgment to resolve the matter.

Morgan Stanley (NYSE:MS - News), Discover's former parent company, will repay MasterCard $35 million and repay Visa $65 million, the companies said.

A person familiar with the matter said those payments were concessions Morgan Stanley made to help get the settlement done.

MasterCard said it will make the payments in November and receive the payment from Morgan Stanley in the same month. MasterCard will take a net after-tax charge of $515.5 million in the third quarter of 2008, it said.

The size of Visa and MasterCard's respective payments was based on their transaction processing volumes.

HenryTo · Posted: Sun Apr 13, 2008 12:12 pm Post subject:

Morningstar: Diner's Club a great deal for Discover Financial:

http://www.morningstar.com/cover/videocenter.html?bctid=1498587112&lineup=stocks

HenryTo · Posted: Wed Apr 09, 2008 1:59 am Post subject:

This is the Motley Fool's Philip Durell's take on it:

http://boards.fool.com/Message.asp?mid=26540144&sort=whole#26540497

diesel · Posted: Mon Apr 07, 2008 6:42 am Post subject:

Discover financial buying Diners Club International.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a484eBOE2kq8&refer=home

My first impression is that this is a great move.
_________________
All cats are gray in the dark.

HenryTo · Posted: Sun Mar 23, 2008 12:11 pm Post subject:

Motley Fool on Discover Financial. Note that this stock bounced over 10% last Thursday. Moreover, with the "Visa overhang" and the "Morgan Stanley spinoff overhang" now gone from this stock, I expect institutional investors to start moving back into Discover again, given that it still looks like it's a well-managed company, despite its exposure to the U.S. consumer:

http://www.fool.com/investing/value/2008/03/20/discover-visas-ugly-stepsister.aspx

HenryTo · Posted: Fri Feb 08, 2008 5:02 pm Post subject:

Personally, I believe this is a good move - as the UK economy should continue to struggle going forward.
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Discover sells Goldfish to Barclays at big loss
Thu Feb 7, 2008 5:49pm EST

By Jonathan Stempel

NEW YORK (Reuters) - Discover Financial Services (DFS.N: Quote, Profile, Research) said on Thursday it agreed to sell its Goldfish credit card unit in Britain to Barclays (BARC.L: Quote, Profile, Research) for $70 million (36 million pounds), abandoning a money-losing business it bought two years ago for $1.68 billion, as consumer credit worsens.

Barclays will acquire 1.7 million Goldfish and affinity card accounts with about $4 billion of receivables, and take on Goldfish's brand, staff and facilities. The card business includes MasterCard and Visa.

Discover, the fourth-largest credit-card network, will take a first-quarter charge of $190 million to $210 million and said the sale should improve earnings for the rest of the year.

"While we have begun to see important progress in our UK business, the funding and operating environment there continues to be a challenge," Chief Executive David Nelms said.

The company lost $56.5 million in its fourth quarter ending November 30, as it wrote down substantially all of Goldfish's goodwill and other intangible assets. Discover had on December 20 reported an $84.1 million loss, but revised that number in a late Thursday regulatory filing to adjust some tax benefits.

Other lenders also have struggled in Britain with mounting consumer credit losses.

Last week, Citigroup's (C.N: Quote, Profile, Research) Internet bank Egg said it would cancel 161,000 customers' credit cards because the credit profiles of those customers had deteriorated.

Riverwoods, Illinois-based Discover expects the Goldfish sale to close by the end of May, pending regulatory approval, and will allow it to focus on its profitable U.S. card and third-party payments businesses.

"The sale is a net positive, given that it eliminates a drag on earnings (and) frees up capital, which we estimate to be $190 million," wrote Michael Taiano, an analyst for Sandler O'Neill & Partners LP. He rates Discover "sell," citing expected higher credit losses "well into 2009."

Britain's Financial Services Authority said on January 29 that lenders face the toughest conditions since the early 1990s.

TRAILING RIVALS

Barclays is Britain's largest credit card provider, with 9.6 million customers. It declined to say whether it will keep the Goldfish brand, which has been heavily advertised.

Antony Jenkins, chief executive of Barclaycard, said Goldfish has similar credit characteristics to Barclays' card business and that his bank would benefit from adding scale.

In February 2006, Morgan Stanley (MS.N: Quote, Profile, Research), which owned Discover at the time, acquired Goldfish from Lloyds TSB Group (LLOY.L: Quote, Profile, Research) for $1.68 billion, regulatory filings show.

International card losses, totalling $596.2 million last year before taxes, have caused Discover shares to lag those of rivals American Express Co (AXP.N: Quote, Profile, Research) and MasterCard Inc (MA.N: Quote, Profile, Research).

Discover shares have fallen 43 percent since Morgan Stanley spun it off at $28.50 per share at the end of June 2007.

In the same period, American Express fell 24 percent, while MasterCard rose 21 percent. Visa Inc, the largest card network, is expected to conduct an initial public offering this year.

As a result of the sale, Discover will treat its international card business as discontinued operations. It was not immediately clear if there might be further losses. Discover did not immediately return a call for comment.

Discover shares closed up 44 cents, or 2.8 percent, at $16.21 on the New York Stock Exchange.

HenryTo · Posted: Sat Feb 02, 2008 8:46 pm Post subject:

This should help (slightly) Discover's credit card services in the UK - given its focus on not-so-prime borrowers as well. I imagine they will get to be more choosy going forward, as the field gets less competitive. Of course, as long as the UK economy does not fall out of bed here...

http://online.wsj.com/article/SB120198752476538417.html?mod=hps_us_whats_news