Discover faces decline in earnings and net yields for Q4 2009

One of the new regulations established by the Credit Card Accountability Responsibility and Disclosure Act designed to mitigate credit card debt consolidation has already had a direct affect on the market and affected the earnings of a major creditor.

According to its financial report for the fourth quarter of 2009, Discover Financial Services’ earnings declined by $77 million in comparison to data from one year earlier, the creditor reported on Thursday.

While net yield on loan receivables increased by 0.82 percentage points in comparison to Q3 2008 figures to 9.37, the figure was nonetheless a 0.53 percentage point decline from the previous quarter.

According to the report, the quarter-to-quarter declines were due to the implementation of the CARD Act that allowed customers to opt out of rate changes. Increases in lower rate student loan balances and the liquidity reserve were also referenced as reasons for the decline.

"Our biggest concern was that credit-card yields came down," Capital Markets analyst Scott Valentin said in an interview, according to Bloomberg. "Relative to expectations, it was a little disappointing."

The survey also showed that in addition to the volume of Discover Card sales had declined by 1 percent compared to 2008 figures, the net charge-off rate in the fourth quarter of 2009 had also risen to 8.31 percent while the delinquency rate jumped to 5.31 percent.