Morgan Stanley reported this morning that its Credit Services division, including the “Discover Card,” posted a record $365 million in pre-tax profits for the quarter ending February 29th, a 26% gain over the year-ago quarter. The Company says it decreased its promotional efforts during the quarter to focus on improving profitability, pumping up the yield to 12.20%. Merchant and cardholder fees were $519 million, down 5% from last year’s first quarter. Discover says an increase in cardholder rewards and a decline in late fees, was partially offset by an increase in merchant discount revenues. Managed credit card loans of $47.3 billion at quarter end were 8.7% lower than a year ago, mainly due to lower balance transfer volume. Total transaction volume declined 7.3% to $24.2 billion. The account base contracted during the quarter by 1.3% year-over-year, down 200,000 accounts since the prior quarter. Active accounts also declined 9% from 1Q/03. The credit card net charge-off rate was 6.31%, 14 basis points higher than a year ago, but 56 basis points lower than the fourth quarter. The net charge-off rate declined as Discover’s bankruptcy losses dropped to their lowest level in nearly three years. The over-30-day-delinquency rate declined 53 basis points from 1Q/03 to 5.80%, and the over-90-day-delinquency rate declined 9 basis points over the same period to 2.86%. The decline in the over-30- day-delinquency rate was the fourth consecutive quarterly decrease. For complete details on Discover’s first quarter performance visit CardData ([www.carddata.com]).
DISCOVER CARD PORTFOLIO SNAPSHOT
1Q/03* 2Q/03* 3Q/03* 4Q/03* 1Q/04* Y/Y CHNG
Outstandings: $51.8b $50.9b $50.0b $48.4b $47.3b -8.7%
Volume: $26.1b $24.0b $24.8b $23.0b $24.2b -7.3%
Accounts: 46.5m 46.4m 46.3m 46.1m 45.9m -1.3%
Actives: 22.3m 21.8m 21.3m 20.8m 20.3m -9.0%
Chargeoffs: 6.17% 6.50% 6.90% 6.87% 6.31% +14bps
Delinquency: 6.33% 6.21% 6.05% 5.97% 5.80% -53bps
Yield: 11.78% 11.97% 11.94% 12.05% 12.20% +42bps
1Q/03 ended 2/28/03; 2Q/03 ended 5/31/03; 3Q/03 ended 8/31/03;
4Q/03 ended 11/30/03′ and 1Q/04 ended 2/29/04.
Source Source: CardData (www.carddata.com)