Shares of Discover Financial Services (DFS) plunged on Thursday, signaling their lowest close since early 2021. Investor concerns arose after the credit-card company announced its decision to allocate more funds in the third quarter to mitigate potential loan losses. DFS stock plummeted 7.5% during Thursday afternoon trading, reaching $84.88. If this downward trend continues, it could mark the lowest closing price since February 1, 2021, when DFS closed at $82.19.
In the recently released third-quarter earnings report, Discover revealed a provision for credit losses amounting to $1.7 billion. This shows a significant increase of $929 million compared to the previous year’s figures. The elevated provision was attributed to a $297 million rise in reserve build and a higher net charge-off rate, which is an indicator of debt that is unlikely to be repaid.
During Discover’s earnings call on Thursday, Chief Financial Officer John Greene highlighted a troubling observation regarding the economy. He mentioned that the company is detecting “some indications of stress,” further noting that household net worth and savings have been deteriorating.
With these developments, Discover Financial Services faces uncertain times as they work towards mitigating potential credit losses and navigating the challenging economic landscape.
