Discover Financial Services Applies to become Bank Holding Company
The fourth largest U.S. credit card company, Discover Financial Services posted fourth-quarter profits due to a $535 million after tax litigation settlement from Visa and Mastercard. In addition, Discover is applying to become a bank holding company in order to access TARP (Troubled Asset Relief Program) funds.
Credit card companies are taking heavy losses due to current economic conditions. Unemployment is at an all time 15 year high. The rise in unemployment has caused many people to become past due on their credit card bills. In hard times, people tend to give more priority to utility bills and groceries than credit cards.
Despite the profits created from a lawsuit windfall, Discover is faced with heavy losses from bad debt right offs. In 2007 bad debt right offs were at 3.85% and have risen to 5.48% in 2008. In addition, Discover is also experiencing a significant rise in 30-day delinquencies. In 2007 30-day delinquencies were at 3.58% and have gone up to 4.56%.
Discover stock has also taken a beating like most of the financial sector. The 52 week high this year for Discover Financial Services was $19.87. Today DFS stock is trading right under $10. That is a 50% loss in stock value for this year.
Discover was originally the brain child of what was once Sears Financial Networks. During the 1987 stock market crash, Sears Financial Networks was forced to sell off its divisions, including its Discover Card division.
The fourth largest U.S. credit card company, Discover Financial Services posted fourth-quarter profits due to a $535 million after tax litigation settlement from Visa and Mastercard. In addition, Discover is applying to become a bank holding company in order to access TARP (Troubled Asset Relief Program) funds.
Credit card companies are taking heavy losses due to current economic conditions. Unemployment is at an all time 15 year high. The rise in unemployment has caused many people to become past due on their credit card bills. In hard times, people tend to give more priority to utility bills and groceries than credit cards.
Despite the profits created from a lawsuit windfall, Discover is faced with heavy losses from bad debt right offs. In 2007 bad debt right offs were at 3.85% and have risen to 5.48% in 2008. In addition, Discover is also experiencing a significant rise in 30-day delinquencies. In 2007 30-day delinquencies were at 3.58% and have gone up to 4.56%.
Discover stock has also taken a beating like most of the financial sector. The 52 week high this year for Discover Financial Services was $19.87. Today DFS stock is trading right under $10. That is a 50% loss in stock value for this year.
Discover was originally the brain child of what was once Sears Financial Networks. During the 1987 stock market crash, Sears Financial Networks was forced to sell off its divisions, including its Discover Card division.
Labels: credit card, credit cards, Discover credit card, Discover Financial Services
Credit Card / Financial news blog post by Todd Holliday at 8:12 PM 