On January 22, U.S. credit card issuer Discover Financial reported more than a threefold increase in fourth-quarter profit, attributed to reduced provisions for credit losses and higher interest income.
The Federal Reserve's decision to decrease interest rates and optimism for an economic soft landing alleviated lenders' concerns about potential credit defaults in 2025.
Discover's provision for credit losses dropped to $1.20 billion in the quarter ending December 31, down from around $1.91 billion a year earlier.
Increased consumer spending contributed to credit card-focused lenders generating more interest income.
Headquartered in Riverwoods, Illinois, Discover achieved net interest income of $3.63 billion for the fourth quarter, marking a nearly 4.7% increase from the same period the previous year.
"Discover's fourth-quarter results reflect a successful 2024 as loan growth, margin expansion, and improved credit translated into strong financial performance," stated interim CEO Michael Shepherd.
Capital One Financial also saw a rise in fourth-quarter profit on Tuesday, supported by increased interest income.
A potential merger between Capital One and Discover would create the sixth-largest U.S. bank by assets, forming a substantial U.S. credit card entity.
In the October-to-December period, Discover reported a net income of $1.29 billion, or $5.11 per share, compared to $366 million, or $1.45 per share, in the same period the previous year.
Following a 54% increase in 2024, the company's shares saw a slight rise in after-hours trading.