Discover Financial Services (NYSE:DFS) stock fell 8.19% (As on January 18, 11:16:40 AM UTC-4, Source: Google Finance) after the company reported a steep decline in fourth-quarter net income due in part to higher compliance-related expenses. The Illinois-based group posted net income of $388 million in the three months ended on Dec. 31, a 62% decrease compared to corresponding period in the prior year. Digital Banking pretax income of $458 million for the quarter was $848 million lower than the prior year period reflecting a higher provision for credit losses and higher operating expenses, partially offset by increased revenue net of interest expense. Total loans ended the quarter at $128.4 billion, up 15% year-over-year, and up 5% sequentially. Credit card loans ended the quarter at $102.3 billion, up 13% year-over-year. Personal loans increased $1.9 billion, or 23%, and private student loans increased $44 million, relatively flat from the prior period. The organic student loan portfolio, which excludes purchased loans, increased $176 million, or 2% year-over-year. Net interest income for the quarter increased $401 million, or 13% driven by higher average receivables partially offset by net interest margin compression. Net interest margin was 10.98%, down 29 basis points versus the prior year. Card yield was 15.63%, up 113 basis points from the prior year primarily driven by higher prime rate and lower payment rates, partially offset by higher interest charge-offs.

Further, Payment Services pretax income of $54 million was up $17 million year-over-year primarily driven by increased PULSE revenue. Payment Services volume was $98.4 billion, up 14% from the prior year period. PULSE dollar volume was up 19% primarily driven by increased debit transaction volume. Diners Club volume was up 14% year-over-year reflecting continued strength across most regions. Network Partners volume decreased 16% from the prior year primarily reflecting lower AribaPay volume.

DFS in the fourth quarter of FY 23 has reported the adjusted earnings per share of $1.54, missing the analysts’ estimates for the adjusted earnings per share of $2.52, according to Bloomberg consensus estimates.

Additionally, the company has declared a quarterly cash dividend of $0.70 per share of common stock payable on March 7, 2024, to holders of record at the close of business on February 22, 2024.

Loan growth is expected to be “relatively flat” in 2024, Discover predicted, while net interest margin is dipping to 10.5%-10.8%, “depending on [the interest] rate outlook”.