Suspended Share Buybacks Overshadow Otherwise Strong Second Quarter for Discover

Narrow-moat Discover Financial Services reported a very strong second quarter, with resilient credit costs and rising net interest income driving results. Preprovision net revenue decreased 10% year over year as the firm lapped a $729 million gain on equity investments and rose 11.1% quarter over quarter to $3.2 billion. Discover reported earnings per share of $3.96, which translates to a return on equity of 32%. However, these strong results were overshadowed by the announcement that Discover is suspending its partially complete $4.2 billion share-buyback program as it conducts an internal investigation into its student loan servicing practices. Details on the investigation that provoked the suspension are scant, creating considerable uncertainty for Discover.