Cautious consumers are causing card volumes to decline

Discover financial servicesThe third quarter Merit Results Evidence presented that one acquisition from Capital one is on the right track.

There is a lot of caution surrounding the consumer situation and many households are looking for ways to consolidate their debts.

Interim CEO Michael Schäfer said in an earnings conference call: “Capital One continues to be a leader in merger-related activity… and applications are currently being reviewed by regulators. “Integration planning is progressing well.”

Payment volume fell 4% due to a slowdown in Discover card sales, totaling $55.2 billion, according to a study Presentation of results. PULSE volume increased 14% to $82.6 billion, driven by an increase Debit transaction volumes.

CFO John Greene said during the call that card claims were up 3% year after year due to a lower payment rate. This metric was offset by the decline in sales volume. Payment rates fell 1% from a year ago but remained 0.7% above pre-pandemic levels.

The decline in card sales was due to “cautious consumer behavior” and Discover own credit tightening measures, Greene said in the call.

“We expect this momentum to continue for the remainder of the year,” said Greene, who later reiterated that consumers were “stable but cautious.”

He added that “households are struggling with inflation and the impact on daily living costs.” Spending per cardholder is returning to more normal levels. Slower, stable spending suggests that households have adjusted their spending patterns to manage their budgets, which is beneficial from a credit perspective.”

Demand for debt consolidation

Greene also noted on the call that personal loans were up 9% year-over-year as the company continues to see “strong demand from consumers seeking debt consolidation.”

In relation to Due to credit, total company-wide charge-offs were approximately 4.9%, up 1.3% from a year ago. In the card business, net charge-offs decreased 0.3% quarter-over-quarter and delinquencies were in line with seasonal trends.

The credit card's net charge-off rate was 5.28%. The company noted that the 30-day credit card loan delinquency rate was 3.84%, up 0.43% from a year ago. The net charge-off rate for personal loans was 4.01%, 1.4% higher than the previous year.

Greene added that the company is raising its expectations for net depreciation and amortization to 4.9% to 5%, up from 4.9% to 5.2% previously. Loan growth should decline low single digit value percentage points, a decline in the low to mid single-digit percentage range is now expected.

The call did not include a question-and-answer session with analysts.

Shares of Discover rose 2% in intraday trading on Thursday.