Discover Financial Services said quarterly profit more than doubled, beating expectations, as customers spent more on their credit cards and the company started to reap the benefits of its expansion beyond credit card lending.

The Riverwoods, Illinois, credit card company reduced its provision for loan losses in the quarter, while revenue grew 5 percent to $1.74 billion.

That better-than-expected growth contrasted with the lagging revenue reported earlier this year at the biggest U.S. lenders, including Bank of America Corp and JPMorgan Chase & Co , which are due to report second-quarter results next month.

It's something that's really outstanding in the financial space, to see that core performance improve. You can't find a lot of financials that are seeing a lot of loan growth, said RBC Capital Markets analyst Jason Arnold.

Lenders have struggled with weak consumer loan demand after the financial crisis, and Discover is increasingly trying to build up other businesses, including its transition-processing and non-credit card lending. It bought a student lending platform from Citigroup Inc in 2010, and last month it agreed to buy an online mortgage origination business from Inc .

Chief Executive David Nelms told Reuters in an interview on Thursday that the company also plans to offer checking accounts eventually, but that first it plans to overhaul its technology. We're a good year or so away from expanding into checking, he said.

He said Discover is gaining some (market) share but he remains cautious on the overall economy.

It's uneven. ... We really want to see faster economic growth, he said.


Discover's overall balance of loans increased 5 percent from a year earlier in the latest quarter, despite a 1 percent decline in credit card loans.

Like American Express Co , Discover both lends directly to consumers and also competes with larger card networks Visa Inc and MasterCard Inc to process card transactions for banks.

It reported profit of $600 million, or $1.09 per share, for the fiscal second quarter ended May 31, compared with a year-earlier profit of $258 million, or 33 cents per share.

Analysts on average had expected 75 cents per share, according to Thomson Reuters I/B/E/S.

The company's shares were up 1.1 percent to $23.85 in afternoon trade. They have gained more than 27 percent this year. Last week Discover announced a $1 billion share buyback program.

(Reporting by Maria Aspan, editing by Gerald E. McCormick, Dave Zimmerman and John Wallace)