1. DFS Presentation By: Katelyn Howard

2. Overview: Discover Financial Services  Issues credit cards and acquires transactions  Operates a closed-loop credit card network and also uses third parties to issue its cards  Extends card loans (receivables) to cardholders who wish to borrow through their credit cards  Owns Diners International, a global credit card network  Products: Credit cards Small business cards Student Loans

3. Key Factors  Price: $25.20  52 Week Range: $16.12 - $27.92  Qualitative Risk Assessment: Low  Morningstar: 4-star rating  Market Cap: $13.216B  Dividend rate: $0.24  Fair Value: $30.00  P/E: 8.58

4. Compare to the Industry

5. 1 Yr. Graph

6. Analysts Report (Financials)  Reported third-quarter net income of $642 million  $1.18 per share more than double the profits reported in the prior-year quarter  Total net revenue up 5% from last year  Card networks continue to be a growth engine for company  Volume growth in the third-party issuer segment accelerated to 11% from 7% in the previous quarter

7. Company News  Expanding into mortgages and student loans  Investing in such things, caused higher expenses  Card sales volume was an all-time record of $26.3 billion in the quarter, up 9% from the prior year  Total loans grew 8% from the prior year to $54.1 billion and were up 3% from the prior quarter  Repurchased 8.4 million shares in the third quarter for $198 million  Bought $2.5 billion of private student loans from Citigroup Inc. to expand business  Expected to add $0.07 per share to 2012 earnings

8. 1 Yr. Compared to Peers

9. “Good Company”  Everyday Giveaway Sweepstakes promotion  Every purchase made on a Discover card is automatically entered for a chance to win one of 150 daily prizes and a monthly prize of $25,000 Discover will match with a $25,000 donation to a public school of the winner’s choosing A grand prize of $1 million will be awarded at the end of the year.

10. Analyst’s Recommendation  Total Number of Analysts: 13  Buy:9  Outperform:1  Hold:4  Underperform:0  Sell:0

11. Recommendations  BUY  Had a strong third quarter  P/E, P/S, 3 yr. Revenue growth, Net Profit, ROE, and D/E are better than the industry  5 yr. growth forecast: 11.8%  Holiday season coming up More people using their credit cards  Expansion into mortgages and student loans