“In the case of Discover, Net Interest Income contributes over 80% of the company’s net revenue, suggesting that it is, first and foremost, a lender (see the chart below).”
Amex and Discover earn similar returns on equity, 26.7 percent against 24.9 percent, yet Amex is worth $174.3 billion and Discover $35.6 billion. The gap is the customer. Amex cardholders spend $13,945 a year, almost four times Discover’s, and Amex nearly doubled its average card fee from $54 to $101 in five years. Discover has the second-worst charge-off and delinquency rates among big US card lenders. The only one worse is Capital One, which is buying it.