Discover’s UK Problems Lead to $84 Million Loss in Quarter

Discover Financial Services reported today a net loss in its fiscal fourth quarter of 2007 of $84 million, partially due to a $391 million impairment charge related to its Goldfish card in the United Kingdom. Discover earned $186.5 million in the fourth quarter of 2006.

For its full fiscal year 2007, Discover reported net income of $561 million, without the impairment charge.

Card receivables in the U.S. totaled $48.2 billion, up 5 percent from a year ago. The managed credit card net charge off rate in the fourth quarter was 3.84 percent, down 15 basis points from the same period a year ago. The 30-day delinquency rate was 3.59 percent, a rise of 20 basis points from a year ago.

Volume on Discover’s payments network in its fourth quarter reached $25 billion, up nearly 28 percent. For the year, payment volume totaled $91.7 billion, up 25 percent from fiscal 2006.

Discover increased its provision for loan losses to $339.9 million, up nearly 42 percent from the same period a year ago. The increase was due to a return to a more normal level of bankruptcies following the decline in 2006, and a higher number of loans on the books, Discover reported.

The international card division reported a pretax loss of $423 million in the quarter, including the impairment charge. The fourth quarter charge off rate was 6.65 percent, up 85 basis points from a year ago. The managed 30 day delinquency rate was 5.25 percent, up 67 basis points from a year ago.

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