Discover Financial Services: The Worst Is Yet to Come
Credit card lender Discover Financial Services (NYSE: DFS) reported its second-quarter results on Thursday, and they were ugly. Total revenue fell 7%, while net income swung from a $753 million profit a year ago to a $368 net loss. The company set aside a whopping $2 provision for loan loss, or a net $1.3 billion reserve build after accounting for $767 million in charge-offs last quarter.
Unfortunately, Discover increased its reserve even over the large build taken in the March quarter during the early days of the pandemic, admitting to a worsening outlook compared with three months ago. Management also forecast charge-offs increasing later this year and into 2021.
On the other hand, Discover's balance sheet and customer base also seem in much better shape compared with the last financial crisis in 2008. And if the government comes through with another round of stimulus, things may not be turn out quite as bad as they might seem.
Source Fool.com
