Discover’s Profits Drop after Flushing Goldfish

Discover Financial Services (NYSE: DFS) today reported fiscal first quarter net income of $81 million, down from $233 million in the same period a year ago, primarily due to a loss of $158 million on its discontinued Goldfish credit card operations in the United Kingdom.

U.S. card receivables finished the quarter ending Feb. 29, 2008, at $47.5 billion, up 2 percent from a year ago.

The card charge off rate was 4.37 percent, up more than 13 percent from 3.86 percent a year ago. Discover reported it expects its full-year charge off rate will be between 4.75 percent and 5.00 percent. The managed over 30-day delinquency rate rose to 3.93 percent from 3.31 percent.

Discover’s third party payment network saw its volume rise 24 percent to $26.3 billion. Discover processes debit cards issued by financial institutions nationwide. It also processed $24 billion in payments for its own credit card.

Discover announced in February it would sell Goldfish to Barclays for about $70 million and leave the UK market LINK. (“Discover Sells U.K. Goldfish Card Unit,” Feb. 7). Discover's then-parent Morgan Stanley bought Goldfish for about $1.7 billion in 2005.