Core Insights - Discover Financial Services reported a 30% year-over-year increase in net income for the first quarter, reaching $1.1 billion, attributed to strong net interest margin and positive credit trends [1] - The net interest margin improved by 115 basis points to 12.18%, primarily due to lower funding costs [2] - The provision for credit losses decreased by $253 million year-over-year to $1.2 billion, supported by a favorable reserve change of $190 million and a $97 million reduction in net charge-offs [2] Credit Performance - Credit card net charge-offs and delinquency rates showed improvement year-over-year, while personal loan net charge-offs remained stable quarter-over-quarter [3] - Total loan net charge-offs met expectations, with delinquency rates reflecting a downward trend [3] Merger Developments - The earnings release coincided with the announcement that Capital One received regulatory approvals to complete its merger with Discover, expected to close around May 18 [4] - Capital One's CEO stated that the merger will create a leading consumer banking and payments platform [5]

Discover (DFS) came out with quarterly earnings of $4.25 per share, beating the Zacks Consensus Estimate of $3.30 per share. This compares to earnings of $1.10 per share a year ago. These figures are adjusted for non- recurring items. This quarterly report represents an earnings surprise of 28.79%. A quarter ago, it was expected that this credit card issuer and lender would post earnings of $3.17 per share when it actually produced earnings of $5.11, delivering a surprise of 61.20%. Over the last four quart ...

DISCOVER FINANCIAL SERVICES Exhibit 99.2 EARNINGS SUMMARY (unaudited, in millions, except per share statistics) | | | | Quarter Ended | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Mar 31, | Dec 31, | Sep 30, | Jun 30, | Mar 31, | Mar 31, 2025 vs. | | | | 2025 | 2024 | 2024 | 2024 | 2024 | | Mar 31, 2024 | | EARNINGS SUMMARY | | | | | | | | | Interest Income | $4,801 | $4,989 | $5,112 | $4,971 | $4,948 | ($147) | (3 %) | | Interest Expense | 1,243 | 1,359 | 1,457 | 1,447 | 1,461 | (218) | ( ...

Core Insights - The acquisition of Discover Financial Services by Capital One is viewed as a transformative strategy to create a leading consumer banking and payments platform [1][2] - Capital One's credit metrics are improving, with delinquency rates showing a steady decline and purchase volumes increasing by 5% in the latest quarter [4][6] Acquisition Impact - The Discover acquisition is expected to enhance Capital One's consumer card and digital banking presence, leveraging Discover's growth platform and customer base of over 100 million [2][3] - The integration aims to combine proven banking and credit card businesses with a global payments network, enhancing Capital One's technology and digital capabilities [2][3] Financial Performance - In Q1, Capital One released $458 million in reserves due to favorable credit performance, with purchase volume growth reaching nearly $158 billion [4] - Loans in the card business increased by 4% year over year to $6.4 billion, while the headline charge-off rate was 6.2%, a slight increase from the previous year [4][5] Delinquency and Consumer Behavior - The 30-plus delinquency rate improved to 4.25%, down 23 basis points from the prior year, indicating a positive trend in credit quality [6] - Despite some consumers facing pressure from inflation and higher interest rates, the overall U.S. consumer remains strong, with improving payment rates and increased spending observed in April [7][8]

Group 1 - Capital One has received federal approval to acquire Discover for $35.3 billion, with the deal expected to close on May 18 [2][3] - The merger is anticipated to enhance competition in payment networks and expand product offerings for customers, according to Discover's interim CEO [2] - Concerns have been raised that the merger may reduce competition among credit card companies, potentially leading to higher prices and fees for consumers [3] Group 2 - The acquisition could provide Discover with the necessary support to compete against Visa and Mastercard, which dominate the credit card network market [4] - Increased competition among payment networks may result in lower swipe fees, benefiting retailers and potentially cardholders [4] - Changes for cardholders are expected to be communicated in advance, with no immediate alterations following the merger's closing [6][7] Group 3 - Capital One's credit cards are likely to transition from Visa or Mastercard to the Discover network after the merger [6] - This change may affect card perks, protections, and acceptance rates, particularly outside the US, as Discover has a narrower acceptance compared to Visa and Mastercard [6][8] - Both Capital One and Discover rank highly in customer service, suggesting that customers may not face significant challenges post-merger [7]

Capital One Financial's (COF 1.20%) planned acquisition of Discover Financial Services (DFS 3.35%) has received regulatory approval, and investors are breathing a sigh of relief.Shares of Discover opened up 7% and Capital One up 5%, before retreating with the broader market to up 2% and 1% as of 11:30 a.m. ET. MasterCard (MA -2.30%) and Visa (V -3.47%) were headed in the other direction, both down about 3% midday.A credit card powerhouseCapital One and Discover are two of the biggest names in credit cards. ...

Core Insights - Discover Financial Services (DFS) is expected to report its Q1 2025 results on April 23, with earnings estimated at $3.32 per share and revenues at $4.21 billion, indicating a year-over-year earnings increase of 201.8% [1] - The current year revenue estimate for DFS is $17.32 billion, reflecting a 3.6% decline year-over-year, while the EPS estimate is $13.79, suggesting a 22.2% decrease [2] - DFS has beaten earnings estimates in three of the last four quarters, with an average surprise of 27.2% [2] Earnings Predictions - The model predicts an earnings beat for DFS, supported by a positive Earnings ESP of +2.53% and a Zacks Rank of 3 (Hold) [3] - Revenue growth in Q1 is expected to be driven by PULSE Network volume, with an estimated growth of 8.4% year-over-year, while the Zacks Consensus Estimate for PULSE Network stands at $85.7 billion [4] - Non-interest income is estimated at $691.6 million, marking a 2.8% year-over-year increase, with expectations of total operating expenses rising by 15.2% due to increased compensation and benefits [5][6]

Core Viewpoint - Analysts forecast Discover (DFS) will report quarterly earnings of $3.32 per share, reflecting a year-over-year increase of 201.8%, with revenues expected to be $4.21 billion, showing no change from the previous year [1] Earnings Estimates - Over the last 30 days, there has been a downward revision of 1.4% in the consensus EPS estimate for the quarter, indicating a collective reconsideration by analysts [2] - Changes in earnings estimates are crucial for predicting potential investor reactions, with empirical studies showing a strong relationship between earnings estimate revisions and short-term stock price performance [3] Key Metrics Forecast - Analysts predict 'Net Interest Margin' will reach 11.7%, up from 11% year-over-year [5] - 'Operating Efficiency' is estimated at 39.7%, down from 54.9% year-over-year [5] - 'Credit Card Loans - Discover Card Sales Volume' is expected to be $49.75 billion, compared to $50.14 billion in the same quarter last year [5] - 'Net Principal Charge-off Rate' is projected at 5.1%, up from 4.9% year-over-year [6] - 'Credit Card Loans - Total Discover Card Volume' is expected to be $52.52 billion, down from $53.24 billion year-over-year [6] - 'Network Volume - Total Payment Services' is forecasted to reach $105.02 billion, compared to $100.32 billion in the same quarter last year [7] - 'Tier 1 Risk Based Capital Ratio' is expected to be 15.4%, up from 11.7% year-over-year [7] - 'Transactions Processed on Networks - Total' is estimated at $3.43 billion, compared to $3.20 billion last year [8] - 'Network Volume - Diners Club International' is forecasted to reach $10.83 billion, up from $10.18 billion year-over-year [8] - 'Network Volume - Network Partners' is estimated at $9.45 billion, down from $11.07 billion year-over-year [9] - 'Network Volume - PULSE Network' is expected to reach $85.72 billion, up from $79.07 billion year-over-year [9] - 'Transactions Processed on Networks - Discover Network' is projected at $909.38 million, compared to $883 million last year [10] Stock Performance - Shares of Discover have shown returns of -3.2% over the past month, compared to the Zacks S&P 500 composite's -5.6% change, with a Zacks Rank 3 (Hold) indicating expected performance in line with the overall market [11]

Core Viewpoint - Capital One has received all necessary regulatory approvals to proceed with its acquisition of Discover Financial Services, valued at $35.3 billion, with the transaction expected to close on May 18, 2024, subject to customary conditions [1][2]. Group 1: Regulatory Approvals - The Federal Reserve Board and the Office of the Comptroller of the Currency (OCC) have approved the merger, indicating a thorough review process over the past 14 months [1][4]. - The OCC's approval is contingent upon addressing any outstanding enforcement actions against Discover [5]. Group 2: Company Statements - Capital One's CEO emphasized the importance of a competitive banking system and acknowledged the regulators' engagement during the review [2]. - Discover's Interim CEO stated that the merger would enhance competition in payment networks and provide a broader range of products, along with community benefits [2]. Group 3: Community Impact - Capital One has argued that the merger will provide greater benefits to underserved communities compared to the companies operating separately, addressing concerns raised by community groups [3]. Group 4: Regulatory Context - The Federal Reserve Board evaluated the merger based on financial resources, community needs, and competitive stability [4]. - The OCC's analysis focused on the merger's impact on communities and the overall banking industry [4]. Group 5: Recent Developments - On the same day as the merger approvals, the FDIC and Federal Reserve fined Discover for misclassifying consumer credit cards, which led to higher interchange fees for merchants [6].

Merger Approval - The merger between Capital One and Discover Financial Services has received regulatory approval, moving the $35 billion deal closer to completion [1][3] - The Federal Reserve and the Office of the Comptroller of the Currency have signed off on the deal, which was initially announced in February 2024 [1][3] Regulatory Actions - The Federal Reserve imposed a $100 million fine on Discover for overcharging certain interchange fees from 2007 to 2023, which Discover has since terminated and is repaying affected customers [1][2] - Capital One has committed to comply with the Federal Reserve's actions against Discover as a condition of the merger approval [3] Industry Context - The merger combines two of the largest non-bank credit card companies, positioning them to compete more effectively against the Visa-Mastercard duopoly [4][6] - The deal will enhance Discover's payment network by providing a significant credit card partner, potentially revitalizing its competitive stance in the market [5][6] - Both companies primarily serve customers seeking cash back or modest travel rewards, indicating a similar target demographic [5][7]