Discover Financial Strengthens Forecast for Loan Growth, NIM and Spending in 2022 (NYSE:DFS)


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Discover the Financials (NYSE: Homeless) raised its outlook for loan growth and net interest margin for 2022, but also sees higher operating expenses than its previous guidance, according to the credit card company’s third quarter slides.

Loan growth is expected to increase in top teens, as a percentage, from its earlier forecast for growth in bottom teens. Net interest margin is now expected to be “moderately” above the upper bound of its previous outlook for an increase of 5-15 basis points from 10.85%.

Credit quality appears to be holding up better than expected as Discover (DFS) expects a net charge rate of 1.8% to 1.9% for the full year, above the previous range from 1.9% to 2.1%.

It has made no changes to its capital return plans. Its stock buyback program remains suspended as its internal investigation into its student loan servicing practices and related compliance matters continues.

Part of this rise is tempered by the outlook for higher operating expenses – which are now expected to rise to a high figure from a mid-digit previously.

Discover Financial (DFS) stock has gained 4.0% in Tuesday’s early afternoon trading as the stock market climbs for the third day on expectation that the Federal Reserve may transition to lower rate hikes from December.

The revised outlook suggests a further rise in PPNR (net pre-provisioning income) thanks to better NIM/loan growth, Wolfe analyst Bill Carcarche said in a note to clients.

Previously (October 24), see consensus on third-quarter financial results as provision for credit losses increases


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