Discover eyes mortgage, checking deals

By Reuters
Posted Sep. 21, 2010 at 9:50 a.m.

Discover Financial Services, fresh from a deal to buy Citigroup’s private student loan assets, is also considering ways to enter the mortgage and checking businesses, Chief Executive David Nelms told Reuters on Monday.

The credit card company would consider buying existing businesses or starting them from scratch, Nelms said.

Discover, like most credit card lenders, is looking for new ways to grow in the face of weak consumer loan demand. It has built up its online-deposit banking business and said on Friday that it would pay $600 million for Citigroup’s student lending platform and private loans.

“There are some other products that we’re not in yet in direct banking that fit the strategy, things like direct mortgages…and a direct checking account,” Nelms said in an interview with Reuters on Monday.

Those products are “areas that we probably won’t be in this year…But if we found the right organic or inorganic way to enter some of these businesses, that would be another possibility,” he said.

Discover would be able to start up its own checking-account business without necessarily buying an existing company, Nelms said.

But “inorganically, with direct mortgages, there are a number of successful players in that space, so that’s an area that I wouldn’t rule out,” he said, adding that potential targets are “not necessarily that large, but things that could give us a good platform” for building a new business.

Nelms declined to give more specifics on the timing or potential candidates for such a deal.

Discover’s shares were trading up 2.4 percent at $15.94 on Monday afternoon. Earlier, the company beat expectations with its quarterly profit report.

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