UPDATE 1-Discover Financial profit falls 33 pct on higher loan reserves

Wed Jan 21, 2015 5:22pm EST
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(Adds details on results, shares)

Jan 21 (Reuters) - Credit card issuer Discover Financial Services Inc reported a 33 percent drop in quarterly profit as it set aside more money to cover bad loans.

The company's shares fell 3.6 percent to $58.65 in extended trading.

Discover set aside $457 million to cover bad loans in the fourth quarter ended Dec. 31, up 29 percent from a year earlier.

The company said costs also increased 10 percent due to increased marketing spend, technology investments, employee compensation and goodwill impairment.

Discover's net income allocated to shareholders fell to $392 million, or 87 cents per share, from $588 million, or $1.23 per share, a year earlier.

The results include charges of about $226 million, included $178 million to simplify the company's cash-back rewards program.

Discover's revenue, net of interest expense, fell 4.3 percent to $2.04 billion.

Analysts on average had expected revenue of $2.20 billion, according to Thomson Reuters I/B/E/S.   Continued...