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Discover sees higher YOY net income for Q2

Discover FinancialServices reported second-quarter net income allocated to common stockholdersof $602 million, or $1.47 per share, compared with $586 million, or $1.33 per share,in the year-ago period.

The S&P Capital IQ consensus GAAP EPS estimate for the quarterwas $1.42.

Net income for the quarter included a nonrecurring tax benefitof $44 million, which contributed 11 cents to EPS.

Revenue, net of interest expense, totaled $2.22 billion, versus$2.18 billion in the second quarter of 2015.

Net interest income for the period amounted to $1.75 billion,compared with $1.64 billion in the same quarter a year ago. Net interest marginwas 9.94%, up from 9.63% in the prior-year quarter.

Provision for loan losses was $412 million, an increase from$106 million a year earlier, mainly due to a larger reserve build. The reserve buildfor the second quarter was $27 million, driven primarily by loan growth. The year-agoquarter included a reserve release of $41 million.

Expenses fell $16 million from the prior year primarily due tothe closure of the mortgage origination business, partially offset by higher regulatoryand compliance costs. The second quarter of 2015 included $62 million in expensesrelated to the mortgage origination business that was later closed.

The delinquency rate for credit card loans over 30 days pastdue was 1.63%, up 8 basis points from the year-ago quarter and down 5 basis pointsfrom the prior quarter. Credit card net charge-off rate for the second quarter was2.39%, up 11 basis points from the year-ago quarter and 5 basis points from thefirst quarter. The personal loans net charge-off rate of 2.38% increased by 28 basispoints from the year-ago period. The student loan net charge-off rate excludingpurchased credit-impaired loans was 1.10%, up 8 basis points from the year-ago quarter.

During the quarter, the company repurchased about 7.8 millioncommon shares for $425 million.