Discover Financial fourth-quarter profit jumps on lower loan loss provisions

(Reuters) – U.S. credit card issuer Discover Financial posted a more than threefold increase in fourth-quarter profit on Wednesday, helped by a drop in provisions for credit losses and a rise in interest income.

The Federal Reserve’s decision to lower interest rates and hopes of a soft landing for the economy helped ease lenders’ concerns about potential credit defaults in 2025.

Discover’s provision for credit losses fell to $1.20 billion in the quarter ended Dec. 31 from about $1.91 billion in the year-ago period.

Strong consumer spending has helped credit card-focused lenders rake in a higher income from interest.

Riverwoods, Illinois-based Discover recorded net interest income of $3.63 billion for the fourth quarter, up nearly 4.7% from the same quarter last year.

“Discover’s fourth quarter results capped off a successful 2024 as loan growth, margin expansion, and credit improvement led to strong financial performance,” said interim CEO Michael Shepherd in a statement.

Capital One Financial (NYSE:COF), which is acquiring Discover for $35.3 billion in an all-stock deal, also recorded a jump in fourth-quarter profit on Tuesday, helped by higher interest income.

The merger between Capital One and Discover would form the sixth-largest U.S. bank by assets and a U.S. credit card behemoth.

Discover posted a net income of $1.29 billion, or $5.11 per share, in the October-to-December period, compared to $366 million, or $1.45 per share, in the year ago period.

Shares of the company, which jumped 54% in 2024, were up marginally in trading after the bell.