Discover Financial Services, the credit card company spun off by Morgan Stanley five months ago, said on Monday that it would take a charge to write off part of its Goldfish credit card business in Britain, where consumer credit has deteriorated.
The noncash write-off covers substantially all of Goldfish's goodwill and other intangible assets, which totaled $422 million as of August 31, Discover said. It will take the charge in its fourth quarter, which ended on November 30.
Goldfish's card business includes MasterCard and Visa.
Continued disruption in the UK financial markets, higher interest rates and our decision to reduce our loan exposure to the UK market have negatively affected the book value of our Goldfish business, Chief Executive David Nelms said in a statement.
Analysts on average had expected fourth-quarter profit of 35 cents per share, according to Reuters Estimates.
Discover's third-quarter profit was $202.2 million, or 42 cents per share, although its international card business suffered a $67 million pretax loss.
Like many rivals, the Riverwoods, Illinois-based company has struggled in Britain with mounting consumer credit losses, although it has said bankruptcy filings have moderated.
Separately, Discover said its board had authorized the repurchase of up to $1 billion in common stock through November 30, 2010. The buyback covers about 12 percent of Discover's reported shares outstanding, Reuters data show.
Discover shares closed Friday at $17.37 on the New York Stock Exchange, down 39 percent since the company's spinoff at $28.50 per share at the end of June. MasterCard Inc (MA.N: Quote, Profile, Research) shares have risen 21 percent over that time.
(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn)