The Motley Foolยท2025-04-24 18:13Financial Performance - Discover Financial Services reported a 31% year-over-year increase in earnings per share for Q1 2025 [4][12] - Net income reached $1.1 billion, reflecting a 30% increase from the previous year [4][12] - The net interest margin improved to 12.18%, up 115 basis points year-over-year and 22 basis points sequentially [4][12] Credit and Loan Metrics - Card receivables decreased by 0.5% year-over-year, while Discover Card sales fell by 2% compared to the prior year [4][12] - Total net charge-offs were 4.99%, which is 7 basis points higher than the previous year and up 35 basis points from the prior quarter [4][12] - The thirty-plus day delinquency rate improved compared to the previous quarter, indicating stable credit performance [5][12] Deposits and Funding - Average consumer deposits increased by 6% year-over-year and 1% sequentially, with direct-to-consumer deposit balances growing by $2 billion [4][12] - Direct-to-consumer deposits now account for 74% of total funding, while average deposit rates were reduced by 22 basis points [12] Merger with Capital One - The merger with Capital One is expected to close on May 18, 2025, following approvals from regulatory bodies and shareholders [10][12] - Due to the merger timing, Discover shareholders will receive dividends declared on Capital One shares instead of Discover's own dividends [6][12] Operational Expenses - Total operating expenses increased by 1% year-over-year, with compensation costs rising by 10% due to higher wages and benefits [12] - Information processing expenses also increased by 10% due to technology investments [12] Capital Ratios - The Common Equity Tier 1 Ratio stood at 14.7%, up 60 basis points compared to the prior quarter, indicating strong capital levels [12]