Growth in Credit Services in Parallel with the Financial Sector

Technically credit services would fall under the financial sector,which for long was the darling of portfolio managers as well as retail investors. However,things changed after the financial crisis,when some of the biggest players had to be bailed out by the government. Things have,however,improved considerably after the government's Troubled Asset Relief Program (TARP). The financial sector typically includes banks,asset management companies,insurance companies,investment services and brokerage firms along with credit services companies such as Discover Financial Services (NYSE: [ DFC ]) and CapitalSource Inc (NYSE: CSE). StockCall has posted free technical research reports on Discover Financial Servicesand CapitalSource Inc.and these can be accessed by signing up at

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Discover Financial Services in Brief

Discover Financial Services operates a bank holding company and a financial holding company. Discover operates in two segments - Direct Banking and Payment Services. Against a market cap of $19.67 billion, the enterprise value of DFS is $35.44 billion. At $39.53, the stock is trading at 2.14x its book value of $18.51. This year on January 2, the company launched "It", a zero-fee card similar to its existing Discover More card but with a more generous rewards program. Download the free report on Discover Financial Services upon registration at

[ http://www.StockCall.com/DPS022013.pdf ]

CapitalSource Inc. in Brief

CapitalSource is primarily a provider of loans to small- and mid-size enterprises across U.S. through its subsidiary CapitalSource Bank. The bank also provides depository services in southern and central California. The Other Commercial Finance segment handles loan commitment made before CapitalSource Bank was established and receives payments on its loan portfolio. CapitalSource Inc. technical report can be accessed for free by signing up at

[ http://www.StockCall.com/CSE022013.pdf ]

With a market cap of $1.80 billion, CapitalSource is a much smaller company but like DFS has a higher enterprise value of $2.69. At $8.60, the stock trades at a low P/B ratio - 1.11x its book value of $7.76. Since December 2010, the company has reduced its outstanding shares by 35% after purchasing 8 million shares in the fourth quarter 2012.

The Sector per Say

The government's TARP program and the government inspired reduction in funding costs have given a fresh lease of life to the financial sector. Similar situation is seen in the sector's credit services segment. With employment solidifying and a net reduction in charge-offs, credit services and credit card business is reviving and showing good potential for growth.

CapitalSource Bank, for example, showed an annual growth of 19% in loans in the year gone by. Discover Financial, on the other, is expected to post an EPS of $4.50 in 2014 as against $0.15 in 2009. In Q3 2012, 100 largest banks in the country reported a 2.8% drop in card delinquencies more than 30 days overdue, which is a record of sorts since 1991.

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Growth in Credit Services in Parallel with the Financial Sector