Discover Charge-Offs Improve and Debit Volumes Grow as Consumers Are ‘Stable'

Core Insights - Discover reported stable consumer financial habits and improving credit metrics in Q1, including lower 30+ day delinquency rates [1][4] - The acquisition by Capital One is expected to enhance competition in payment networks and expand product offerings [2][3] Financial Performance - Discover's first-quarter earnings showed improving credit metrics, increased debit spending, and higher deposits ahead of the Capital One acquisition [2] - PULSE network volumes increased by 3% to $81.3 billion, driven by growth in debit spending [3] - Card sales were down 2% year over year, with sales volume at $49.3 billion [6][7] - Ending loan balances in the card business were $99 billion, down from $102.8 billion in the previous quarter [6] Consumer Behavior - Discover's customer behavior was stable, evidenced by spending, payment, and credit trends [4] - The 30+ day delinquency rate decreased by 0.18% compared to the previous quarter [4] Provision and Charge-offs - Discover's provision expense declined by $253 million, indicating a stable credit performance [5] - Personal loan balances remained flat at $10.1 billion, with net charge-offs at 4.21% [7] Deposits and Funding - Average consumer deposits increased by 6% year over year and 1% sequentially, with direct-to-consumer deposits growing by $2 billion [8] - Direct-to-consumer deposits now account for 74% of total funding [8] Segment Performance - The Diners Club segment showed robust growth, with volumes at $12 billion, up 18% year over year, driven by expansion in India and Israel [8]