Discover Financial Services 4Q net income rises

 Discover Financial Services on Thursday reported higher earnings for its fiscal fourth quarter, as users of its namesake credit card stepped up purchases and the company wrote off fewer unpaid balances.
Even so, the Riverwoods, Ill.-based company's results fell short of Wall Street expectations, and investors sent its shares down over 3 percent Thursday.
Discover, the nation's sixth-largest credit card issuer, said total loans, credit card loans and Discover card sales volume increased 6 percent in the quarter, which coincided with the tail end of the back-to-school shopping season and the ramp up to the December holidays — key periods when consumers traditionally spend more.
Discover card sales volume increased to $26.5 billion, while credit card loans at the end of the quarter totaled $49.6 billion. Private student loans rose 6 percent, while personal loans climbed 24 percent, the company said.
"Our strong receivables and sales growth results demonstrate the effectiveness of our marketing programs, consumers' preference for cash rewards and our acceptance and awareness initiatives," Chairman and CEO David Nelms said during a conference call with analysts.
While Discover's customers racked up more debt, more of them paid off credit card balances on time. The delinquency rate on credit-card loans over 30 days past due was 1.86 percent, an improvement of 53 basis points from a year earlier. The rate of charge-offs, when the company writes off unpaid credit card balances, dropped to a historic low of 2.29 percent.
"While the continued improvement in credit appears to be nearing an end, we don't believe we are at a point where charge-offs are poised to rise significantly," Nelms said.
Nationwide the rate of credit card payments at least 90 days overdue edged up in the third quarter to 0.75 percent, according to credit reporting agency TransUnion. The rate is coming off historically low levels, however.
Discover has traditionally had one of the lowest rates for default and delinquency in the credit card industry, the result of tighter lending standards and close monitoring of problem accounts.
The company has reported improvement in its customers' default and late-payment rates since the Great Recession, as cardholders moved to pay down debt and boost savings.
Late-payment rates tend to creep higher in the fall, particularly as cardholders spend more money on holiday shopping, travel and other expenses. The company said that seasonal factor led to a slight increase in its credit card loan delinquency rate between the third and fourth quarter.
While Discover's rates for late payments and defaults remain low, the company has been making more loans. As a result, it has been setting aside more funds to cover potential loan losses.
In the September-to-November quarter, Discover increased its provision for loan losses by 6 percent to $338 million, noting that was somewhat offset by a drop in the number of unpaid credit card balances that had to be written off.
Meanwhile Discover's payment-services business, which competes with Visa and MasterCard, saw dollar volume increase 13 percent in the latest quarter.
In a client note Thursday, RBC Capital Markets analyst Jason Arnold said Discover is benefiting from increased acceptance of its cards and favorable credit trends.
"We remain very enthused by Discover's fundamental position and believe the company remains well positioned for loan and (earnings per share) growth," wrote Arnold, who has a $50 price target on the stock.
For the period ended Nov. 30, Discover earned $541 million, or $1.07 per share. That compares with $513 million, or 95 cents per share, a year earlier.
Analysts surveyed by FactSet expected earnings of $1.12 per share.
Revenue climbed 11 percent to $2 billion, after interest expense. Wall Street forecast $1.96 billion.
Also on Thursday, Discover declared a dividend of 14 cents per share. It will be paid on Jan. 17 to shareholders of record on Jan. 3.
Discover shares fell $1.36, or 3.4 percent, to close at $38.41 Thursday. The stock is up 60 percent this year.

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Richardson: NKorea trip is private, humanitarian

WASHINGTON (AP) — Former New Mexico Gov. Bill Richardson says the State Department should not be nervous about a visit he's making to North Korea with Google's executive chairman, Eric Schmidt.
The State Department has advised against his making the trip. But Richardson says he doesn't work for the U.S. government.
Richardson said Friday he's concerned about an American citizen detained in North Korea, Kenneth Bae, and has spoken to Bae's son. The former U.N. ambassador and U.S. energy secretary points out he has helped negotiate the release of American service members and hostages in the past. Richardson says he's also concerned about what the U.S. believes is covert nuclear testing.
Richardson tells CBS "This Morning" it's a private, humanitarian mission and says the State Department shouldn't be so worried.

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Abbas sees Palestinian unity as Fatah rallies in Gaza

GAZA (Reuters) - President Mahmoud Abbas predicted the end of a five-year split between the two big Palestinian factions as his Fatah movement staged its first mass rally in Gaza with the blessing of Hamas Islamists who rule the enclave.
"Soon we will regain our unity," Abbas, whose authority has been limited to the Israeli-occupied West Bank since the 2007 civil war between the two factions, said in a televised address to hundreds of thousands of followers marching in Gaza on Friday, with yellow Fatah flags instead of the green of Hamas.
The hardline Hamas movement, which does not recognize Israel's right to exist, expelled secular Fatah from Gaza during the war. It gave permission for the rally after the deadlock in peace talks between Abbas's administration and Israel narrowed the two factions' ideological differences.
The Palestinian rivals have drawn closer since Israel's assault on Gaza assault in November, in which Hamas, though battered, claimed victory.
Egypt has long tried to broker Hamas-Fatah reconciliation, but past efforts have foundered over questions of power-sharing, control of weaponry, and to what extent Israel and other powers would accept a Palestinian administration including Hamas.
An Egyptian official told Reuters Cairo was preparing to invite the factions for new negotiations within two weeks.
Israel fears grassroots support for Hamas could eventually topple Abbas's Palestinian Authority (PA) in the West Bank.
"Hamas could seize control of the PA any day," Israeli Prime Minister Benjamin Netanyahu said on Thursday.
The demonstration marked 48 years since Fatah's founding as the spearhead of the Palestinians' fight against Israel. Its longtime leader Yasser Arafat signed an interim 1993 peace accord that won Palestinians a measure of self rule.
Hamas, which rejected the 1993 deal, fought and won a Palestinian parliamentary election in 2006. It formed an uneasy coalition with Fatah until their violent split a year later.
Though shunned by the West, Hamas feels bolstered by electoral gains for Islamist movements in neighboring Egypt and elsewhere in the region - a confidence reflected in the fact Friday's Fatah demonstration was allowed to take place.
"The success of the rally is a success for Fatah, and for Hamas too," said Hamas spokesman Sami Abu Zuhri. "The positive atmosphere is a step on the way to regain national unity."
Fatah, meanwhile, has been riven by dissent about the credibility of Abbas's statesmanship, especially given Israel's continued settlement-building on West Bank land. The Israelis quit Gaza unilaterally in 2005 after 38 years of occupation.
"The message today is that Fatah cannot be wiped out," said Amal Hamad, a member of the group's ruling body, referring to the demonstration attended by several Abbas advisers. "Fatah lives, no one can exclude it and it seeks to end the division."
In his speech, Abbas promised to return to Gaza soon and said Palestinian unification would be "a step on the way to ending the (Israeli) occupation".

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Malala Yousafzai, Pakistani teen shot by Taliban, is released from UK hospital

A daily summary of global reports on security issues.

Malala Yousafzai, the Pakistani teen who was shot in the head by the Taliban in the fall for promoting girls’ education, was released from a British hospital yesterday.

Malala, who will spend the next few weeks with her family in the UKbefore returning to the hospital for more surgery, quickly became an international symbol of resistance to the Taliban’s efforts to deny women and girls education after the attack last October.

"Malala is a strong young woman and has worked hard with the people caring for her to make excellent progress in her recovery," said Dave Rosser, Queen Elizabeth Hospital's medical director.

15-year-old Malala was targeted in the close-range shooting – which took place on a school bus – because of a blog she wrote for the BBC in Urdu. Her blog, which was nominated for several awards, was written under a pen name, and was highly critical of the Taliban's ban on education for girls in the Swat valley.

According to The Christian Science Monitor, Malala blogged “about her views and about the atrocities of Islamic militias controlling the valley from 2007-2009.” The Taliban’s reign supposedly came to an end there after an Army operation in 2009, reports Agence France-Presse.

Recommended: How much do you know about Pakistan? Take this quiz.

In interviews with Pakistani journalist Owais Tohid, Malala described her blog and motivation:

"I wanted to scream, shout and tell the whole world what we were going through. But it was not possible. The Taliban would have killed me, my father, my whole family. I would have died without leaving any mark. So I chose to write with a different name. And it worked, as my valley has been freed….

"I want to change the political system so there is social justice and equality and change in the status of girls and women. I plan to set up my own academy for girls.…”

The Taliban have bombed more than 1,500 schools since 2008 in the Pakistani province where Malala comes from, according to a separate Monitor story. Under 80 percent of children between the ages of 6 and 16 are enrolled in school across Pakistan, and among those, less than half are girls. Malala’s writing documents the Taliban’s control of the Swat valley, as schools were burned and extreme rules were created and enforced.

"Saturday January 3, 2009: Today our headmistress announced that girls should stop wearing uniform because of Taliban. Come to schools in casual wear. In our class only three out of 27 attended the school. My three friends have quit school because of Taliban threats."

"January 5, 2009: Today our teacher told us not to wear colorful dress that might make Taliban angry."

"Tuesday March 2009: On our way to school, my friend asked me to cover my head properly, otherwise Taliban will punish us."

Malala’s ordeal has inspired people around the world to take action on supporting girls’ education, and her survival has made her a hero to many.

Reuters reports that more than 250,000 people have signed a petition calling for her to receive theNobel Peace Prize, while the United Nations released a plan named after the young woman to motivate girls around the world to enroll in school by the end of 2015. The UN also created a “Malala day” in November to support education for girls, reports the AFP. The Pakistani government even renamed her former school in her honor, reports the Telegraph. The angry reaction to that move, however, highlighted the ongoing fears surrounding the Taliban, as many students worried that any reference to Malala would create additional targets for Taliban violence.

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A current student told the Telegraph, "The militants didn't spare Malala, then how can they be expected to spare a college named after her…. The government should refrain from politicizing our education. We want to pursue our studies in peaceful environments and the new name of our college can bring it into spotlight and Taliban could hit it.”

According to a separate Telegraph report, Malala has said she would like to return home to Pakistanonce she has fully recovered. Officials say, however, that she will remain a target of the Taliban “as long as terrorism threatens the country.”

Malala’s release coincides with the appointment of her father, Ziauddin Yousafzai, as education attaché for the Pakistani consulate in Birmingham, reports Pakistani news outlet The News. “It is widely believed that it was Ziauddin’s own experience of campaigning for education and human rights that originally inspired Malala as her parents encouraged her by every means to be confident and vocal,” The News reports.

Malala was flown to England after an initial surgery removed the bullet – which “grazed” her brain upon entry – in Pakistan last fall. Her next procedure will take place in late January or early February and will focus on the reconstruction of her skull, reports Reuters.

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What does Google want with North Korea?

Google chairman Eric Schmidt plans to visit North Korea as early as next week in what analysts see as part of North Korean leader Kim Jong-un’s drive to give an appearance of closing the vast digital divide between his isolated country and the rest of the world.
Although Mr. Schmidt is not expected to reach any real deal with the North, his presence there seems to show a desire in North Korea to improve the technological capabilities of people almost totally shut off from the Internet. Schmidt, for his part, has often noted the power of the Internet – and Google – to lift people out of poverty and political oppression.
“In the last few years, Google has met with NGOs that do work with North Korea,” observes David Kang, director of the East Asian Studies Center at the University of Southern California. “This is not a sudden or impulsive visit.”
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Schmidt will be traveling with two figures who have been influential in recent years in developing contacts with North Korea. One of them, Bill Richardson, the former New Mexico governor who served as UN ambassador during the presidency of Bill Clinton, has advocated rapprochement with the North during several visits to Pyongyang.
Key in arranging Schmidt’s visit is assumed to be Richardson’s longtime adviser on North Korea, Tony Namkung, who has visited North Korea more than 40 times during the past 25 years.
Mr. Namkung, born to Korean parents in China and educated in the US, was instrumental in Mr. Clinton’s visit to North Korea in August 2009. That resulted in the release of the journalists Laura Ling and Euna Lee, who had been held for 140 days after their arrest while filming along the North’s Tumen River border with China. He also advised the Associated Press on opening a bureau in Pyongyang.
Schmidt's mission raised the possibility that he might be the type of high-level visitor to whom North Korea might be willing to release another American now in prison in Pyongyang. Kenneth Bae, a human rights activist from Oregon, was charged with "hostile acts" after entering North Korea legally from China as leader of a tour group to the Rason economic zone in the northeast. A devout Christian, he was believed to have been carrying religious material -- strictly forbidden in the North.
There was no doubt, though, that the overall rationale for the visit would be political, diplomatic and economic -- with a view to relations with the US.
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“I don't know for sure,” says Nick Eberstadt of the American Enterprise Institute, “but it certainly looks as if Google is the ‘dangle’ for the Richardson/Namkung mission to Pyongyang.” Mr. Eberstadt, who has written extensively on North Korea, adds, “What Schmidt/Google stand to achieve is another question altogether, of course.”
Just what’s in the visit for Schmidt is especially puzzling considering that no North Korean can use Google's search engine unless working for a high-level government agency with a need for vital facts and figures.
In addition, Tom Coyner, a longtime business consultant in Seoul, raises another concern: "What could be the long-term implications for Internet freedom of information as central governments become stronger in denying individual rights – including to free access to information."
Victor Cha, who served as director of Asian affairs on the National Security Council during the presidency of George W. Bush, observes that Google withdrew operations from China to Hong Kong in 2010 as a result of Chinese Internet censorship. The problem, he says, “would likely be exponentially worse in North Korea.”
Mr. Cha, in questions and answers posted by the Washington-based Center for Strategic and International Studies, where he serves as a senior adviser, said that “only about 4,000 North Koreans have access to the Web and under very tightly monitored conditions.”
Kim Jong-un, however, is believed to have played a key role in persuading his father, Kim Jong-il, to accept the inevitability of communication by mobile telephones several years ago. More than 1 million North Koreans now communicate on cellphones through a system set up by Orascom, the Egyptian telecommunications giant, that strictly blocks calls in and out of North Korea.
Thus David Straub, a former senior US diplomat in Seoul, believes that Schmidt may want to "look at what Orascom has done with cell phones in North Korea and thus that Google might be able to do something with the Internet there."
Kim Jong-un “clearly has a penchant for the modern accoutrements of life,” says Mr. Cha. “If Google is the first small step in piercing the information bubble in Pyongyang, it could be a very interesting development.”
Any attempt to formalize a deal between Schmidt and a North Korean state company, however, would run afoul of UN sanctions on doing business with the North. State Department spokeswoman Victoria Nuland says “we don't think the timing of this is particularly helpful,” especially in view of North Korea’s latest launch of a long-range rocket last month, in violation of sanctions.
Still, the State Department can do nothing to block the trip. “They are private citizens,” she says. “They are making their own decision.

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France's Bardot threatens exile over elephants

PARIS (AP) — Sex symbol-turned-animal rights activist Brigitte Bardot is threatening to join actor Gerard Depardieu in Russian exile unless France halts the scheduled euthanasia of two sick circus elephants.
The 1960s screen diva says authorities have ignored her "numerous proposals" to save Baby and Nepal, a pair of 42-year-old elephants dying of tuberculosis at a Lyon zoo.
In a statement on her foundation's website Bardot says that if the elephants are killed she will request Russian citizenship "to flee this country that is now just a graveyard for animals."
This week France was shocked to learn Depardieu, an Academy Award-winner and pillar of French cinema, had received Russian citizenship after he was called "pathetic" by France's prime minister in a bust-up over the country's proposed 75 percent income tax for the superrich.

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Macy's key revenue figure rises in December

 Macy's said Thursday that revenue in stores open at least one year rose 4.1 in December, edging past Wall Street estimates.
But the figure grew less than the company expected during the combined two-month November and December period, the key holiday shopping months, and Macy's lowered its fourth-quarter guidance.
The department store chain also said it will close six underperforming stores.
Analysts had expected the December figure to rise 4 percent, according to Thomson Reuters.
Total revenue for the five weeks ended Dec. 29 rose nearly 4 percent to $5.1 billion from $4.92 billion last year.
The two months of November and December is a key holiday shopping period for retailers, which can make up to 40 percent of annual revenue during that time. Macy's said revenue in stores open at least one year rose 2.5 percent during the two months combined.
CEO Terry Lundgren said the rate of growth of revenue in stores open at least one year was less than expected, but that was due partly to uncertain economic news and the lingering effect of Superstorm Sandy.
Revenue in stores open at least one year is a key measure of a retailer's health, because it excludes revenue at stores that recently opened or closed.
Year-to-date, revenue in stores open at least one year rose 3.3 percent and total revenue also rose 3.3 percent to $25.89 billion from $25.07 billion.
The company now expects revenue in stores open at least one year to rise 3 percent to 3.5 percent in the fourth quarter, down from prior expectations of 4.2 percent.
Macy's now expects earnings of $1.91 to $1.96 for the fourth quarter, excluding costs related to a tender offer and store closings. Previously it expected earnings of $1.94 to $1.99 per share. Analysts expect $1.98 per share, according to FactSet.
Meanwhile, Macy's said it will close six underperforming stores as part of a normal review of its business. The stores include a Bloomingdales Fashion Show Home Store in Las Vegas, Nev.; and Macy's in the Paseo Colorado mall in Pasadena, Calif.; Belmont, Mass.; Honolulu, Hawaii; St. Paul, Minn.; and Houston, Texas. Closing the stores will cost $2 million to $4 million taken in the fourth quarter.
After the closings, Macy's will operate 798 stores in 45 states. Macy's said it plans to open nine other Macy's and Bloomingdale's around the country to replace the stores it is closing.
Macy's shares slipped 22 cents to $38.09 in morning trading. Its shares have traded in a 52-week range of $32.29 to $42.17.

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Stocks sink as Congress heads for another showdown

 The stock market pulled back slightly Thursday, a day after the Dow Jones industrial average posted its strongest gain in more than a year.
Retailers reported mixed sales and the prospect of a new budget battle in Congress helped nudge stocks lower.
The Dow Jones industrial average was down 25 points to 13,387 an hour after the opening bell. UnitedHealth Group led the Dow lower, sinking $1.65 to $52.88, a 3 percent drop, after analysts at Deutsche Bank and other firms cut their ratings on the insurer's stock.
The Standard & Poor's 500 index was off two points at 1,460 and the Nasdaq composite slipped three points to 3,110.
The Dow soared 308 points Wednesday, its largest point gain since December 2011. The rally was ignited after lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the "fiscal cliff." The law passed late Tuesday night averted that outcome for now, but other fiscal squabbles are already looming in Congress including disagreements over raising the government's borrowing limit.
Ross Stores led the S&P 500 with a 6 percent gain in early trading. The retailer said sales at stores open for at least a year increased 11 percent during the holiday shopping season. Ross Stores' stock was up $3.65 to $58.09.
Nordstom Inc. surged 2 percent after the department-store chain also reported strong holiday sales, especially in the South and Midwest. Nordstrom's stock was up $1.21 to $54.84.
Other retailers struggled during the holidays as shoppers held out for deep discounts.
Family Dollar Stores sank 12 percent after reporting earnings that fell short of analysts' projections. The company also forecast a weaker outlook for the current period and full year. Family Dollar's stock lost $7.25 to $56.75.
Hormel Foods, known for making Spam and other meat products, said Thursday that it's buying Skippy, the country's No. 2 peanut butter brand, for about $700 million, from Unilever. Hormel's stock jumped 5 percent, or $1.56, to $33.60.

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Stocks pause on Wall Street after a two-day rally

Stocks are little changed on Wall Street as the market pauses following a huge two-day rally.
The Dow Jones industrial average was off four points at 13,408 at midday Thursday. UnitedHealth Group led the Dow lower after analysts at Deutsche Bank and other firms cut their ratings on the insurer's stock.
The Standard & Poor's 500 index edged up a point to 1,463 and the Nasdaq composite rose three points to 3,115.
The Dow soared 308 points Wednesday, its largest point gain since December 2011. The rally was ignited after lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the "fiscal cliff." The Dow also rose 166 points on Monday, before the New Year's holiday.

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World stocks put relief rally on pause

 Enthusiasm faded on Wall Street and in European markets Thursday over U.S. legislators' deal to stave off the so-called fiscal cliff, a series of automatic tax increases and spending cuts that could have hurt the world's largest economy.
While the deal passed by Congress this week avoids the near-term risk of a major blow to businesses and households, it left unsolved several budget measures, mainly government spending cuts.
Major indexes fell modestly or saw only small gains as investors considered that U.S. politicians now have only two months to negotiate those cuts.
Wall Street lacked momentum after strong gains the previous day. The Dow industrials average was flat at 13,415.12 and the broader Standard & Poor's 500 index was up barely 0.1 percent at 1,464.31.
In Europe, Germany's DAX shed 0.3 percent to close at 7,756.44 and France's CAC-40 lost 0.3 percent to 3,721.17. Britain's FTSE 100 rose 0.3 percent to 6,047.34. Shares rose sharply in Switzerland, however, as markets there were closed on Wednesday.
A last-minute deal agreed to by U.S. lawmakers late Tuesday triggered a global market rally on Wednesday. But while it settled tax rates, the deal only postponed automatic spending cuts to defense and domestic programs for two months. And it doesn't include any significant deficit-cutting agreement, meaning the country still doesn't have a long-term plan on how to curb spending.
Rabobank analyst Jane Foley said that a "more realistic sense" of the situation with U.S. budget affairs "has started to trickle into market sentiment this morning."
"Over the next couple of months, U.S. budget talks are set to remain a threat to risk appetite," Foley wrote in a note to investors.
Looking ahead, investors will keep an eye on the U.S. monthly jobs report due Friday. The figures often move markets as they are a key indicator for the health of the U.S. economy, which has struggled to gain steam in recent months.
Figures from human resources firm ADP showed U.S jobless claims rose by more than expected to 372,000. But that was offset by more positive figures showing the economy created 215,000 new jobs during the month.
The ADP numbers are a prelude to Friday's official U.S. government numbers.
Earlier in Asia, benchmarks in Hong Kong and Sydney rose modestly and crested above the 19-month highs hit Wednesday. Hong Kong's Hang Seng Index rose 0.1 percent to 23,398.98, while Australia's S&P/ASX 200 rose 0.7 percent to 4,740.70. Benchmarks in Singapore, Taiwan, Indonesia, Thailand, the Philippines and New Zealand also rose.
Still, South Korea's Kospi fell 0.6 percent to 2,019.41 amid fears the weakening Japanese yen could hurt South Korean exporters.
Markets in Japan and mainland China were closed for extended holidays until Friday.
In currencies, the euro was down 0.6 percent at $1.311 while in commodity markets the benchmark crude oil contract was trading 5 cents higher at $93.17 in New York.

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