Discover Financial Services’ (DFS – Free Report) fourth-quarter 2017 adjusted earnings of $1.55 per share surpassed the Zacks Consensus Estimate by 1.3%. The bottom line also rose 10.7% year over year driven by strong loan and revenue growth across segments.

Including non-recurring charges and pre-tax expenses, net income per share came at 99 cents in the fourth quarter, down 29% year over year.

For 2017, the company reported net income of $5.42 per share, down 6% from the prior-year quarter.

Operational Update

For the reported quarter, the company’s revenue net of interest expenses increased 11% year over year to $2.6 billion. The top line also surpassed the Zacks Consensus Estimate by 41%.

For 2017, revenue net of interest expenses increased 9% year over year to $9.9 billion.

Consumer deposits grew 9% from the year-ago quarter to $84.2 billion.

Interest expenses of $436 million jumped 19% year over year.

Total other expenses increased 15% to $1 billion due to higher employee compensation and benefits, marketing and business Development expenses and professional fees.

Segment Update
 
Direct Banking Segment

This segment’s pre-tax income rose 0.2% to $870 million. This was because higher revenues were partially offset by increased provision for loan losses and operating expenses.

Total loans increased 9% year over year to $84.2 billion.

Credit card loans rose 9% to $67.3 billion.

Personal loans increased 14%, private student loans increased 2% and jumped 11% excluding purchased student loans, all on a year-over-year basis.

Net interest income increased 12% to $2.1 billion from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.28%, up 21 basis points from the prior-year quarter.

Total other income rose 6% to $494 million from the prior-year quarter, driven by higher discount and interchange revenues.

Provision for loan losses of $678 million increased 17% year over year due to higher net charge-offs, partially offset by a smaller reserve build.