Discover Financial Profit Misses Expectations

Discover Financial Services Inc. on Wednesday posted weaker-than-expected profit growth in its fourth quarter amid soft growth in its credit card business.

Shares fell 2.2% to $47.64 a share in after-hours trading.

Riverwoods, Ill.-based Discover said it posted strong student and personal loan originations in the quarter, but credit card loan growth was at the low end of its target.

Credit-card loans grew 3.1% to $57.9 billion

Chief Executive David Nelms described the growth as "slower than we'd like" and said Discover is working to accelerate its credit card loans in 2016.

In all, the company earned $500 million, up from $404 million in the year-earlier period. On a per-share basis, earnings rose to $1.14 a share from 87 cents a share. But analysts polled by Thomson Reuters had projected earnings of $1.30 a share.

Like American Express Co., Discover both issues credit cards and operates its own payment network. In addition, Discover has been expanding aggressively in other loan products, such as student and personal loans.

Personal loans rose 9.6% and private student loans increased 16% excluding purchased loans.

Overall, loans were up 3.5% to $72.4 billion

Sales volume on Discover credit cards grew 2.6%, or 5% excluding the impact of lower gas prices.

Revenue net of interest expense edged up to $2.21 billion from $2.04 billion. Analysts had projected revenue of $2.22 billion.

Write to Chelsey Dulaney at [e-mail]

(END) Dow Jones Newswires

January 27, 2016 17:15 ET (22:15 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.