Discover Financial Reports $1.1 Billion in Q1 2025 Net Income Amid Strong Credit Trends and Margin Gains
Discover Financial Services reported first quarter 2025 net income of $1.1 billion, or $4.25 per diluted share, marking a 30% year-over-year increase from $851 million, or $3.25 per share, in the same quarter of 2024. The performance was driven by a combination of improved net interest margin, a favorable credit environment, and effective cost control.
Total revenue net of interest expense rose 2% to $4.25 billion. Net interest margin expanded 115 basis points year-over-year to 12.18%, fueled in part by the completed sale of the student loan portfolio, which also helped reduce total loans outstanding to $117.4 billion—a 7% decline year-over-year. Excluding the sale, loans grew 1% from the prior year period. Credit card loans held steady at $99.0 billion, and personal loans totaled $10.1 billion.
Provision for credit losses declined $253 million to $1.2 billion, supported by a $190 million favorable reserve change and a reduction in net charge-offs. The total net charge-off rate was 4.99%, up 7 basis points from Q1 2024, but lower when adjusted for the student loan sale. Credit card net charge-offs decreased 19 basis points year-over-year to 5.47%, while 30+ day delinquencies improved to 3.66%.
Operating expenses increased just 2% to $1.4 billion, reflecting higher wages, benefits, and technology investments, partially offset by lower anticipated civil penalties.
In the Payment Services segment, pretax income rose 11% to $91 million. Growth was supported by increased volume in PULSE and Diners Club networks. Total volume reached $96 billion, with Diners Club up 18% year-over-year. Network Partners volume fell sharply due to the exit of a key partner.
Discover’s Board of Directors declared a quarterly dividend of $0.70 per share, payable June 5 to shareholders of record as of May 23. However, with the merger with Capital One expected to close around May 18, Discover shareholders will likely begin receiving dividends from Capital One instead.
Interim CEO Michael Shepherd highlighted the company’s continued execution and readiness for the upcoming Capital One merger, which received all required regulatory approvals as of April 18. Discover plans to finalize the merger by mid-May, pending customary closing conditions.
