[ad_1]
Shares of Discover Financial Services (DFS) are trending lower after the company reported fourth-quarter results that showed net interest income fell 62% year-over-year, missing earnings expectations. The total loan portfolio rose 15% from a year earlier to $128.4 billion, but it wasn’t enough as stock prices fell nearly 9% on Thursday afternoon.
Yahoo Finance anchors Madison Mills and Josh Lipton break down the latest developments from Discover and what it could mean for local banks in 2024.
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor’s note: This article was written by Nicholas Jacobino.
video transcript
Madison Mills: Financial Services is in the red today after missing out on significant profits in the fourth quarter. Adjusted EPS was $1.54, well below the Street’s estimate of $2.52. The big headline number here is Discover’s net interest income, which is down 62% year over year. As if that weren’t bad enough, forward guidance could exceed 10% depending on the outlook for interest rates.
And interim CEO Josh said this happened after some compliance issues and executive restructuring. The interim CEO said the company has taken steps to strengthen its risk management and compliance programs. These measures were not enough to support stock prices today.
Josh Lipton: Yeah, I’m just looking, I’m just looking through the analyst notes after they’re printed here. What’s your reaction? Some people acknowledge the results, but listen, they say they were weaker than expected because of reserves, operating expenses and high expectations for 2024. You know they were weaker than expected.
However, the same memo will talk about what they call a silver lining: net interest margin expectations, likely conservative. They are telling their customers and maybe there will be a revival of the stock.
Madison Mills: Yeah.
Josh Lipton: However, the stock price has fallen about 13% in the past 12 months.
Madison Mills: It was very difficult for these local banks to recover from the failure of Silicon Valley Bank and the rate hikes that affected not only large banks but also small banks due to deposit flight. We haven’t seen much recovery in this area.
[ad_2]
Source link
