Is Discover Financial a Buy Following a70% Earnings Spike?

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Discover Financial Services Nachrichten

Capital One Financial Corporation

Stocks Analysis by ValueWalk (Dave Kovaleski) covering: Discover Financial Services, Capital One Financial Corporation. Read ValueWalk (Dave Kovaleski)'s latest article on Investing.com

Discover stock was surging after earnings were released on Wednesday after the market closed and was up 4% on Thursday, though it has since shed some of those gains to trade up 0.25%.

That is not a given, however. The merger would create a combined credit card and banking giant, combining Discover, the fourth largest payment processor, with Capital One, one of the largest banks and credit card issuers. The proposed transaction will surely face intense regulatory scrutiny. So, with credit card rates high during this time of high interest rates, it is generating lots of net interest income. Net interest income jumped 11% in the quarter, year-over-year, to $3.5 billion. And that was aided by an 8% increase in loan balances to $128 billion.

In the second quarter, provisions for credit losses were just $739 million, well below the $1.3 billion set aside in Q2 of 2023 and the $1.5 billion in the first quarter of this year. Also, the 30+ day delinquency rate for credit card loans was 3.69%, which is 83 basis points higher than Q2 2023, but 14 basis points than Q1 2024.

 

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