Discover Financial reports higher income at the expense of litigation settlement

On Thursday Discover Financial Services (DFS), a credit card issuer and electronic payment services company, uncovered the results for the first quarter 2009. The report showed that the company had higher first quarter profits owing to a gain from an antitrust litigation settlement. Meantime the company also announced that it reduced its quarterly dividend to enhance its capital base.

Discover Financial, a Riverwoods, Illinois-based company, reported that its first-quarter net income rose to $120.39 million or $0.25 per share from $81.21 million or $0.17 per share reported in the first quarter of 2008. Net income reported for the first quarter 2009 included nearly $297 million associated with the Visa/MasterCard antitrust litigation settlement.

Earnings from continuing operations declined to $120.39 million or $0.25 per share from $238.83 million or $0.50 per share reported last year. 

Discover Financial also recorded a $503.07 million net interest income in the first quarter 2009 as compared with $323.36 million in the previous year. On a managed basis, net interest income for the quarter increased to $1.165 billion from $983.66 million in the previous year. wall Street forecast the company to have revenues of $446.67 million for the first quarter of 2009.

The financial services company also mentioned that it cut its quarterly dividend to $0.02 per share in a move to strengthen its capital b base. The dividend is payable on April 22 to stockholders of record at the close of business on April 1 while it expects the reduction in dividend to strengthen its capital base by nearly $80 million on an annualized basis.