On the Call: Discover Financial CEO David Nelms sees Student Loan deal boosting profit in 2011

By AP
Monday, September 20, 2010

On the Call: Discover Financial CEO David Nelms

NEW YORK — Discover Financial Services Co. CEO David Nelms said the acquisition of The Student Loan Corp. from Citigroup will significantly boost the company’s student lending business.

The deal, announced Friday, will add relationships with 1,000 schools to Discover’s existing 800 — some will overlap, he noted during a call to discuss the Riverwoods, Ill., company’s fiscal third quarter results.

It also adds about 300,000 customers to Discover’s rolls, which it can use to sell future student loans, along with other products like credit cards.

The CEO pointed to statistics showing that more than 70 percent of the balances of the loans it’s acquiring are backed by insurance against loss, and 74 percent are co-signed, as factors that keep the risk low for Discover. He said it will add about 9 cents per share to profits in 2011.

NELMS: “The planned acquisition will position us well as we pursue growth opportunities in private student loans. … The combined student loan business is expected to remain a top three originator of private student loans, with Discover’s competitive position being significantly enhanced.”

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