Discover Financial Services Reports Fourth Quarter Net Income Of $551 Million Or $1.07 Per Diluted Share

Additional factors that could cause the company’s results to differ materially from those described in the forward-looking statements can be found under “Risk Factors,” “Business – Competition,” “Business – Supervision and Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company's Annual Report on Form 10-K for the year ended November 30, 2011; “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company's Quarterly Reports on Form 10-Q for the quarters ended February 29, 2012, May 31, 2012 and August 31, 2012; and "Risk Factors" in the company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2012, which are filed with the SEC and available at the SEC's internet site ( http://www.sec.gov).

DISCOVER FINANCIAL SERVICES
(unaudited, in millions, except per share statistics)
			Quarter Ended
			Nov 30, 2012		Aug 31, 2012		Nov 30, 2011
EARNINGS SUMMARY
Interest Income			$1,706		$1,695		$1,620
Interest Expense			312		325		360
Net Interest Income			1,394		1,370		1,260
Discount/Interchange Revenue			521		533		489
Rewards			281		268		215
Discount and Interchange Revenue, net			240		265		274
Protection Products Revenue			99		104		107
Loan Fee Income			83		80		87
Transaction Processing Revenue			54		59		48
Other Income			128		86		30
Total Other Income			604		594		546
Revenue Net of Interest Expense			1,998		1,964		1,806
Provision for Loan Losses			338		126		319
Employee Compensation and Benefits			278		274		229
Marketing and Business Development			192		161		144
Information Processing & Communications			78		69		69
Professional Fees			115		107		114
Premises and Equipment			20		20		18
Other Expense			117		195		95
Total Other Expense			800		826		669
Income Before Income Taxes			860		1,012		818
Tax Expense			309		385		305
Net Income			$551		$627		$513
Net Income Allocated to Common Stockholders			$541		$621		$508
PER SHARE STATISTICS
Basic EPS			$1.08		$1.21		$0.95
Diluted EPS			$1.07		$1.21		$0.95
Common Stock Price (period end)			$41.61		$38.73		$23.82
Book Value per share			$19.55		$18.02		$15.59
SEGMENT- INCOME BEFORE INCOME TAXES
Direct Banking			$827		$963		$776
Payment Services			33		49		42
Total			$860		$1,012		$818
BALANCE SHEET SUMMARY
Total Assets			$75,238		$73,909		$68,784
Total Liabilities			65,506		64,763		60,542
Total Equity			9,732		9,146		8,242
Total Liabilities and Stockholders' Equity			$75,238		$73,909		$68,784
TOTAL LOAN RECEIVABLES STATISTICS
Ending Loans 1, 2, 3			$61,017		$59,157		$57,337
Average Loans 1, 2			$59,343		$57,721		$55,539
Interest Yield			11.39%		11.50%		11.56%
Net Principal Charge-off Rate			2.03%		2.12%		2.81%
Net Principal Charge-off Rate excluding PCI Loans 4			2.21%		2.32%		3.05%
Delinquency Rate (over 30 days) 4			1.75%		1.71%		2.30%
Delinquency Rate (over 90 days) 4			0.83%		0.81%		1.14%
Net Principal Charge-off Dollars			$300		$308		$387
Net Interest and Fee Charge-off Dollars			$88		$92		$128
Loans Delinquent Over 30 Days 4			$983		$931		$1,200
Loans Delinquent Over 90 Days 4			$468		$441		$596
Allowance for Loan Loss (period end)			$1,725		$1,687		$2,205
Change in Loan Loss Reserves			$38		($182)		($68)
Reserve Rate 5			2.83%		2.85%		3.85%
Reserve Rate Excluding PCI Loans 4, 5			3.07%		3.11%		4.23%
CREDIT CARD LOANS STATISTICS
Ending Loans 3			$49,642		$48,124		$46,639
Average Loans			$48,122		$47,067		$45,756
Interest Yield			12.16%		12.27%		12.36%
Net Principal Charge-off Rate			2.29%		2.43%		3.24%
Delinquency Rate (over 30 days)			1.86%		1.81%		2.39%
Delinquency Rate (over 90 days)			0.91%		0.89%		1.20%
Net Principal Charge-off Dollars			$274		$287		$370
Loans Delinquent Over 30 Days			$925		$870		$1,117
Loans Delinquent Over 90 Days			$451		$427		$560
Allowance for Loan Loss (period end)			$1,554		$1,522		$2,070
Change in Loan Loss Reserves			$32		($191)		($84)
Reserve Rate			3.13%		3.16%		4.44%
Total Discover Card Volume			$28,940		$29,763		$26,946
Discover Card Sales Volume			$26,533		$27,202		$25,033
NETWORK VOLUME
PULSE Network			$39,376		$40,990		$33,911
Network Partners 6			2,297		2,231		1,939
Diners Club International 7			7,298		7,041		7,469
Total Payment Services			48,971		50,262		43,319
Discover Network - Proprietary			27,462		28,085		25,926
Total			$76,433		$78,347		$69,245
1 Total Loans includes mortgages and other loans.
2 Purchased Credit Impaired ("PCI") loans are loans that were acquired in which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables.
3 Effective November 30, 2012 the Company began including confirmed card transactions as part of loans in process, which resulted in a $365 million increase to ending card receivables for the fourth quarter. Comparable periods (shown above) have not been adjusted to reflect this change.
4 Excludes PCI loans (described above) which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the company is recognizing interest income on a pool of loans, it is all considered to be performing.
5 The Reserve Rate includes federal student loans held for sale.
6 Network Partners was formerly referred to as Third-Party Issuers. The reference has been changed to better reflect the nature of the volume included. The composition, however, has not changed.
7 Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment.
Note: See Glossary for definitions of financial terms in the financial supplement which is available online at the SEC's website ( http://www.sec.gov) and the company's website ( http://investorrelations.discoverfinancial.com).

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