8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 15, 2011

DISCOVER FINANCIAL SERVICES

(Exact name of registrant as specified in its charter)

Commission File Number: 001-33378

Delaware	36-2517428
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)

2500 Lake Cook Road, Riverwoods, Illinois 60015

(Address of principal executive offices, including zip code)

(224) 405-0900

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.         Results of Operations and Financial Condition.

On December 15, 2011, Discover Financial Services (the “Company”) released financial information with respect to the quarter and year ended November 30, 2011. A copy of the press release containing this information is attached hereto as Exhibit 99.1 and incorporated herein by reference. In addition, a copy of the Company's Financial Data Supplement for the quarter and year ended November 30, 2011 is attached hereto as Exhibit 99.2 and incorporated herein by reference.

The information contained in this Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly stated by specific reference in such filing.

Item 9.01.         Financial Statements and Exhibits.

(d) Exhibits

Exhibit No.	Description
99.1	Press Release of the Company dated December 15, 2011 containing financial information for the quarter and year ended November 30, 2011
99.2	Financial Data Supplement of the Company for the quarter and year ended November 30, 2011

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DISCOVER FINANCIAL SERVICES
Dated: December 15, 2011	By:	/s/ Simon Halfin
		Name:  Simon Halfin
		Title:  Vice President, Assistant General Counsel and Assistant Secretary

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release of the Company dated December 15, 2011 containing financial information for the quarter and year ended November 30, 2011
99.2	Financial Data Supplement of the Company for the quarter and year ended November 30, 2011

EX-99.1

Exhibit 99.1

Discover Financial Services Reports Fourth Quarter Net Income of $513 Million or $0.95 Per Diluted Share

Declares Quarterly Dividend of $0.10 Per Share, an Increase of 67%

RIVERWOODS, Ill. --(BUSINESS WIRE)--December 15, 2011–Discover Financial Services (NYSE: DFS) today reported net income of $513 million for the fourth quarter of 2011, as compared to $350 million for the fourth quarter of 2010.

Fourth Quarter Highlights

● Total loans grew 17% from the prior year to a record $57.3 billion.  The company purchased an additional $2.4 billion in private student loans in the fourth quarter.

● Credit card loans grew 3% from the prior year and Discover card sales volume was up 8%.

● The delinquency rate for credit card loans over 30 days past due continued to improve, declining to 2.39%.  The credit card net charge-off rate declined to 3.24%.

● Payment Services pretax income was up 35% from the prior year to $42 million. Transaction volume for the segment was $43.3 billion in the quarter, an increase of 7% from the prior year.

“We are pleased to report another quarter of very strong performance as we generated organic growth in all loan products, had continued improvement in credit and demonstrated solid expense control,” said David Nelms, chairman and chief executive officer of Discover.  “Our fourth quarter results, together with our already strong capital levels, allowed us to increase our dividend and execute on our share repurchase program.”

Nelms added, “Our results this quarter cap a year of outstanding performance, with all-time record net income of $2.2 billion and a 30% return on equity for the full year.  We achieved record volume of over $280 billion across all of our networks.  We further enhanced our competitive position in private student loans by completing two successful and earnings accretive acquisitions.”

Segment Results:

Direct Banking

Direct Banking pretax income of $776 million in the quarter was up $222 million, or 40%, from the prior year.

Discover card sales volume grew 8% from the prior year to $25.0 billion.  The increase was driven by growth in spending from both new and existing customers.  Credit card loans increased, ending the quarter at $46.6 billion, up $1.5 billion or 3% from the prior year.

Total loans ended the quarter at $57.3 billion, up $8.5 billion, or 17%, compared to the prior year.  Private student loans increased $6.3 billion, including the acquisition of $3.1 billion in loans in the first quarter of 2011, and an additional $2.4 billion in the fourth quarter of 2011.  Personal loans increased $770 million from the prior year.

Net interest margin was 9.10%, down 18 basis points from the prior year and 16 basis points from the prior quarter.  The decrease in net interest margin in both periods reflects the acquisitions of student loans which have lower yields as well as a decline in credit card yield, partially offset by lower funding costs.  Credit card yield was 12.36%, a decrease of 32 basis points from the prior year and 10 basis points from the prior quarter.  The decline in credit card yield reflects the impacts of the CARD Act, an increase in promotional rate balances and an increase in customers who pay their balance in full, partially offset by lower interest charge-offs.  Interest expense as a percent of total loans decreased 50 basis points from the prior year and 11 basis points from the prior quarter as the company continued to take advantage of available low rate funding.

Net interest income increased $136 million, or 12%, from the prior year, primarily driven by an increase in loan balances related to the student loan acquisitions, an increase in personal loans and lower interest expense. Interest income on credit card loans was relatively flat compared to the prior year as a decline in yield was offset by an increase in loan balances.

The delinquency rate for credit card loans over 30 days past due was 2.39%, an improvement of 167 basis points from the prior year, and 4 basis points from the prior quarter.  The credit card net charge-off rate decreased to 3.24% for the fourth quarter of 2011, down 371 basis points from the prior year and 61 basis points from the prior quarter.

Provision for loan losses of $319 million decreased $64 million, or 17%, from the prior year, driven by lower charge-offs, partially offset by a lower reserve release.  Principal charge-offs decreased $410 million from the prior year as a result of the continued decline in delinquencies in 2011. The reserve release for the fourth quarter of 2011 was $68 million, versus a release of $414 million in the fourth quarter of 2010.

Other income increased $66 million, or 16%, from the prior year. The fourth quarter of 2010 included a $28 million charge related to federal student loans classified as held for sale.  Discount and interchange revenue increased from the prior year reflecting higher sales volume.  Late fees increased, reflecting a decline in late fee charge-offs.

Expenses were up $44 million, or 7%, from the prior year, reflecting increased compensation costs, expenses related to The Student Loan Corporation and investments in growth initiatives.

Payment Services

Payment Services pretax income of $42 million in the quarter was up $11 million, or 35%, from the prior year.  Revenue increased $8 million, primarily driven by an increase in transactions on the PULSE network and higher margins.  Expenses decreased $3 million, reflecting lower marketing costs related to timing of programs.

Payment Services dollar volume was $43.3 billion for the fourth quarter, up 7% from the prior year, driven by higher PULSE, Diners Club International and third-party issuer volume.

Dividend

The company’s board declared a cash dividend of $0.10 per share of common stock, payable on Jan. 19, 2012, to stockholders of record at the close of business on Dec. 29, 2011.

Share Repurchases

The company repurchased 9.6 million shares in the fourth quarter for $227 million, bringing the total shares repurchased for the program to 18.0 million or $425 million.

Conference Call and Webcast Information

The company will host a conference call to discuss its fourth quarter results on Thursday, Dec. 15, 2011, at 9:30 a.m. Central time.  Interested parties can listen to the conference call via a live audio webcast at http://investorrelations.discoverfinancial.com.

About Discover

Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit www.discoverfinancial.com.

A financial summary follows. Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the financial supplement filed as Exhibit 99.2 to the company’s Current Report on Form 8-K filed today with the Securities and Exchange Commission (“SEC”). Both the earnings release and the financial supplement are available online at the SEC’s website (http://www.sec.gov) and the company’s website (http://investorrelations.discoverfinancial.com).

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which speak to our expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Such statements are based upon the current beliefs and expectations of the company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this press release, and there is no undertaking to update or revise them as more information becomes available.

The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment and the levels of consumer confidence and consumer debt, and investor sentiment; the impact of current, pending and future legislation, regulation and regulatory and legal actions, including new laws and rules related to financial regulatory reform, new laws and rules limiting or modifying certain credit card or student lending practices, new laws and rules affecting securitizations, funding and liquidity, and bank holding company regulations and supervisory guidance on the company's ability to execute its business strategies; the actions and initiatives of current and potential competitors; the company’s ability to manage its expenses; the company’s ability to successfully achieve card acceptance across its networks and maintain relationships with network participants; the company’s ability to sustain and grow its private student loan business; the company’s ability to manage its credit risk, market risk, liquidity risk, operational risk, legal and compliance risk, and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit markets; the impact of rating agency actions; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; losses in the company’s investment portfolio; restrictions on the company’s operations resulting from financing transactions; the company’s ability to increase or sustain Discover card usage or attract new customers; the company’s ability to attract new merchants and maintain relationships with current merchants; the effect of political, economic and market conditions, geopolitical events and unforeseen or catastrophic events; fraudulent activities or material security breaches of key systems; the company’s ability to introduce new products or services; the company’s ability to sustain its investment in new technology and manage its relationships with third-party vendors; the company’s ability to collect amounts for disputed transactions from merchants and merchant acquirers; the company’s ability to attract and retain employees; the company’s ability to protect its reputation and its intellectual property; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. The company routinely evaluates and may pursue acquisitions of or investments in businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or the company's debt or equity securities. The company’s pending acquisition of the mortgage origination business of Tree.com, Inc. is subject to closing conditions including, among others, approvals of regulators.

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, 2010 and “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 28, 2011, May 31, 2011 and August 31, 2011, 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, 2011			Aug 31, 2011			Nov 30, 2010
EARNINGS SUMMARY
Interest Income		$1,620			$1,599			$1,499
Interest Expense		360			362			375
Net Interest Income		1,260			1,237			1,124
Discount/Interchange Revenue		489			517			453
Rewards		215			234			203
Discount and Interchange Revenue, net		274			283			250
Fee Products Revenue		107			108			103
Loan Fee Income		87			84			72
Transaction Processing Revenue		48			44			40
Other Income		30			33			7
Total Other Income		546			552			472
Revenue Net of Interest Expense		1,806			1,789			1,596
Provision for Loan Losses		319			100			383
Employee Compensation and Benefits		229			242			200
Marketing and Business Development		144			133			150
Information Processing & Communications		69			64			67
Professional Fees		114			106			104
Premises and Equipment		18			18			17
Other Expense		95			79			90
Total Other Expense		669			642			628
Income Before Income Taxes		818			1,047			585
Tax Expense		305			398			235
Net Income		$513			$649			$350
Net Income Allocated to Common Stockholders		$508			$642			$347
PER SHARE STATISTICS
Basic EPS		$0.95			$1.18			$0.64
Diluted EPS		$0.95			$1.18			$0.64
Common Stock Price (period end)		$23.82			$25.16			$18.28
Book Value per share		$15.59			$14.88			$11.85
SEGMENT- INCOME BEFORE INCOME TAXES
Direct Banking		$776			$1,009			$554
Payment Services		42			38			31
Total		$818			$1,047			$585
BALANCE SHEET SUMMARY
Total Assets		$68,784			$65,726			$60,785
Total Liabilities		$60,542			$57,720			$54,328
Total Equity		8,242			8,006			6,457
Total Liabilities and Stockholders' Equity		$68,784			$65,726			$60,785
TOTAL LOAN RECEIVABLES STATISTICS
Ending Loans 1, 2		$57,337			$54,082			$48,836
Average Loans 1, 2		$55,539			$53,013			$48,597
Interest Yield		11.56	%		11.83	%		12.24	%
Net Principal Charge-off Rate		2.81	%		3.43	%		6.58	%
Net Principal Charge-off Rate Excluding PCI Loans3		3.05	%		3.63	%		6.58	%
Delinquency Rate (over 30 days) 3		2.30	%		2.35	%		3.89	%
Delinquency Rate (over 90 days) 3		1.14	%		1.17	%		2.03	%
Net Charge-off Dollars		$387			$459			$797
Loans Delinquent Over 30 Days 3		$1,200			$1,203			$1,902
Loans Delinquent Over 90 Days 3		$596			$599			$994
Allowance for Loan Loss (period end)		$2,205			$2,273			$3,304
Change in Loan Loss Reserves		($68	)		($359	)		($414	)
Reserve Rate 4		3.85	%		4.20	%		6.77	%
Reserve Rate Excluding PCI Loans3, 4		4.23	%		4.44	%		6.77	%
CREDIT CARD LOANS STATISTICS
Ending Loans		$46,639			$46,178			$45,157
Average Loans		$45,756			$45,343			$44,670
Interest Yield		12.36	%		12.46	%		12.68	%
Net Principal Charge-off Rate		3.24	%		3.85	%		6.95	%
Delinquency Rate (over 30 days)		2.39	%		2.43	%		4.06	%
Delinquency Rate (over 90 days)		1.20	%		1.22	%		2.12	%
Net Charge-off Dollars		$370			$440			$774
Loans Delinquent Over 30 Days		$1,117			$1,121			$1,831
Loans Delinquent Over 90 Days		$560			$565			$958
Allowance for Loan Loss (period end)		$2,070			$2,154			$3,209
Change in Loan Loss Reserves		($84	)		($365	)		($412	)
Reserve Rate		4.44	%		4.66	%		7.11	%
Total Discover Card Volume		$26,946			$28,455			$25,054
Discover Card Sales Volume		$25,033			$26,271			$23,219
NETWORK VOLUME
PULSE Network		$33,911			$35,109			$31,334
Third-Party Issuers		1,939			1,984			1,768
Diners Club International 5		7,469			7,660			7,328
Total Payment Services		43,319			44,753			40,430
Discover Network - Proprietary		25,926			27,133			24,075
Total		$69,245			$71,886			$64,505

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 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.

4 The Reserve Rate includes federal student loans held for sale.

5 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).

CONTACT:

Discover Financial Services

Investors:

Craig Streem, 224-405-3575

craigstreem@discover.com

or

Media:

Jon Drummond, 224-405-1888

jondrummond@discover.com

EX-99.2

Exhibit 99.2

DISCOVER FINANCIAL SERVICES
EARNINGS SUMMARY
(unaudited, in millions, except per share statistics)
	Quarter Ended																					Twelve Months Ended
	Nov 30, 2011			Aug 31, 2011			May 31, 2011			Feb 28, 2011			Nov 30, 2010			November 30, 2011 vs. November 30, 2010						Nov 30, 2011			Nov 30, 2010			2011 vs. 2010
EARNINGS SUMMARY
Interest Income		$1,620			$1,599			$1,573			$1,553			$1,499			$121			8	%		$6,345			$6,146			$199			3	%
Interest Expense		360			362			380			383			375			(15	)		(4	%)		1,485			1,583			(98	)		(6	%)
Net Interest Income		1,260			1,237			1,193			1,170			1,124			136			12	%		4,860			4,563			297			7	%
Discount/Interchange Revenue		489			517			489			468			453			36			8	%		1,963			1,793			170			9	%
Rewards		215			234			223			207			203			12			6	%		879			738			141			19	%
Discount and Interchange Revenue, net		274			283			266			261			250			24			10	%		1,084			1,055			29			3	%
Fee Products Revenue		107			108			105			108			103			4			4	%		428			413			15			4	%
Loan Fee Income		87			84			81			86			72			15			21	%		338			340			(2	)		(1	%)
Transaction Processing Revenue		48			44			45			43			40			8			20	%		180			150			30			20	%
Other Income		30			33			47			65			7			23		NM				175			137			38			28	%
Total Other Income		546			552			544			563			472			74			16	%		2,205			2,095			110			5	%
Revenue Net of Interest Expense		1,806			1,789			1,737			1,733			1,596			210			13	%		7,065			6,658			407			6	%
Provision for Loan Losses		319			100			176			418			383			(64	)		(17	%)		1,013			3,207			(2,194	)		(68	%)
Employee Compensation and Benefits		229			242			230			213			200			29			15	%		914			803			111			14	%
Marketing and Business Development		144			133			124			136			150			(6	)		(4	%)		537			463			74			16	%
Information Processing & Communications		69			64			66			65			67			2			3	%		264			258			6			2	%
Professional Fees		114			106			105			90			104			10			10	%		415			343			72			21	%
Premises and Equipment		18			18			18			17			17			1			6	%		71			70			1			1	%
Other Expense		95			79			92			74			90			5			6	%		340			245			95			39	%
Total Other Expense		669			642			635			595			628			41			7	%		2,541			2,182			359			16	%
Income Before Income Taxes		818			1,047			926			720			585			233			40	%		3,511			1,269			2,242			177	%
Tax Expense		305			398			326			255			235			70			30	%		1,284			504			780			155	%
Net Income		$513			$649			$600			$465			$350			$163			47	%		$2,227			$765			$1,462			191	%
Net Income Allocated to Common Stockholders		$508			$642			$593			$459			$347			$161			46	%		$2,202			$668			$1,534			230	%
Effective Tax Rate		37.3	%		38.0	%		35.2	%		35.4	%		40.3	%								36.6	%		39.7	%
Net Interest Margin		9.10	%		9.26	%		9.15	%		9.22	%		9.28	%		(18	)	bps				9.18	%		9.14	%		4		bps
ROE		25	%		33	%		33	%		28	%		22	%								30	%		12	%
Ending Common Shares Outstanding		529			538			546			545			545			(16	)		(3	%)		529			545			(16	)		(3	%)
Weighted Average Common Shares Outstanding		532			544			546			545			545			(13	)		(2	%)		542			544			(2	)		(0	%)
Weighted Average Common Shares Outstanding (fully diluted)		533			545			546			546			545			(12	)		(2	%)		543			549			(6	)		(1	%)
PER SHARE STATISTICS
Basic EPS		$0.95			$1.18			$1.09			$0.84			$0.64			$0.31			48	%		$4.06			$1.23			$2.83		NM
Diluted EPS		$0.95			$1.18			$1.09			$0.84			$0.64			$0.31			48	%		$4.06			$1.22			$2.84		NM
Common Stock Price (period end)		$23.82			$25.16			$23.84			$21.75			$18.28			$5.54			30	%		$23.82			$18.28			$5.54			30	%
Book Value per share		$15.59			$14.88			$13.79			$12.65			$11.85			$3.74			32	%		$15.59			$11.85			$3.74			32	%

  Note: See Glossary of Financial Terms for definitions of financial terms.

1

DISCOVER FINANCIAL SERVICES
EARNINGS SUMMARY
(unaudited, in millions)
	Quarter Ended														Twelve Months Ended
	Nov 30, 2011		Aug 31, 2011		May 31, 2011		Feb 28, 2011		Nov 30, 2010		November 30, 2011 vs. November 30, 2010				Nov 30, 2011		Nov 30, 2010		2011 vs. 2010
SEGMENT- INCOME BEFORE INCOME TAXES
Direct Banking		$776		$1,009		$883		$677		$554		$222	40	%		$3,345		$1,128		$2,217	197	%
Payment Services		42		38		43		43		31		11	35	%		166		141		25	18	%
Total		$818		$1,047		$926		$720		$585		$233	40	%		$3,511		$1,269		$2,242	177	%
TRANSACTIONS PROCESSED ON NETWORKS
Discover Network		439		451		422		410		413		26	6	%		1,722		1,605		117	7	%
PULSE Network		939		950		1,006		929		901		38	4	%		3,824		3,309		515	16	%
Total		1,378		1,401		1,428		1,339		1,314		64	5	%		5,546		4,914		632	13	%
NETWORK VOLUME
PULSE Network		$33,911		$35,109		$36,719		$34,380		$31,334		$2,577	8	%		$140,119		$118,179		$21,940	19	%
Third-Party Issuers		1,939		1,984		1,838		1,772		1,768		171	10	%		7,533		6,802		731	11	%
Diners Club International1		7,469		7,660		7,380		6,998		7,328		141	2	%		29,507		27,133		2,374	9	%
Total Payment Services		43,319		44,753		45,937		43,150		40,430		2,889	7	%		177,159		152,114		25,045	16	%
Discover Network - Proprietary		25,926		27,133		25,684		24,784		24,075		1,851	8	%		103,527		95,760		7,767	8	%
Total		$69,245		$71,886		$71,621		$67,934		$64,505		$4,740	7	%		$280,686		$247,874		$32,812	13	%

1 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 of Financial Terms for definitions of financial terms.

2

DISCOVER FINANCIAL SERVICES
BALANCE SHEET STATISTICS
(unaudited, in millions)
	Quarter Ended
	Nov 30, 2011			Aug 31, 2011			May 31, 2011			Feb 28, 2011			Nov 30, 2010			November 30, 2011 vs. November 30, 2010
BALANCE SHEET SUMMARY
Assets
Cash and Investment Securities		$10,342			$10,847			$10,344			$11,463			$11,913			($1,571	)	(13	%)
Total Loan Receivables		57,337			54,082			52,510			51,663			48,836			8,501		17	%
Allowance for Loan Losses		(2,205	)		(2,273	)		(2,632	)		(3,033	)		(3,304	)		1,099		33	%
Net Loan Receivables		55,132			51,809			49,878			48,630			45,532			9,600		21	%
Premises and Equipment, net		483			466			471			459			461			22		5	%
Goodwill and Intangible Assets, net		443			445			447			449			444			(1	)	(0	%)
Other Assets		2,384			2,159			2,298			2,506			2,435			(51	)	(2	%)
Total Assets		$68,784			$65,726			$63,438			$63,507			$60,785			$7,999		13	%
Liabilities & Stockholders' Equity
Direct to Consumer and Affinity Deposits		$26,177			$24,493			$22,923			$21,795			$20,597			$5,580		27	%
Brokered Deposits and Other Deposits		13,401			13,094			12,296			13,065			13,816			(415	)	(3	%)
Deposits		39,578			37,587			35,219			34,860			34,413			5,165		15	%
Borrowings		18,337			17,818			18,039			19,090			17,706			631		4	%
Accrued Expenses and Other Liabilities		2,627			2,315			2,657			2,658			2,209			418		19	%
Total Liabilities		60,542			57,720			55,915			56,608			54,328			6,214		11	%
Total Equity		8,242			8,006			7,523			6,899			6,457			1,785		28	%
Total Liabilities and Stockholders' Equity		$68,784			$65,726			$63,438			$63,507			$60,785			$7,999		13	%
BALANCE SHEET STATISTICS
Total Common Equity		$8,242			$8,006			$7,523			$6,899			$6,457			$1,785		28	%
Total Common Equity/Total Assets		12.0	%		12.2	%		11.9	%		10.9	%		10.6	%
Total Common Equity/Net Loans		15.0	%		15.5	%		15.1	%		14.2	%		14.2	%
Tangible Assets		$68,341			$65,281			$62,991			$63,058			$60,341			$8,000		13	%
Tangible Common Equity1		$7,799			$7,561			$7,076			$6,450			$6,013			$1,786		30	%
Tangible Common Equity/Tangible Assets 1		11.4	%		11.6	%		11.2	%		10.2	%		10.0	%
Tangible Common Equity/Net Loans 1		14.1	%		14.6	%		14.2	%		13.3	%		13.2	%
Tangible Common Equity per share  1		$14.75			$14.05			$12.97			$11.83			$11.04			$3.71		34	%
REGULATORY CAPITAL RATIOS
Total Risk Based Capital Ratio		16.5	%		17.0	%		16.8	%		16.0	%		15.9	%
Tier 1 Risk Based Capital Ratio		13.2	%		13.6	%		13.2	%		12.4	%		12.2	%
Tier 1 Leverage Ratio		11.5	%		11.7	%		11.3	%		10.2	%		9.9	%
LIQUIDITY
Liquidity Investment Portfolio		$8,548			$9,394			$8,724			$10,232			$10,132			($1,584	)	(16	%)
Undrawn Credit Facilities 2, 3		17,602			16,880			15,532			14,414			12,492			5,110		41	%
Total Liquidity		$26,150			$26,274			$24,256			$24,646			$22,624			$3,526		16	%

1   Tangible Common Equity ("TCE") is a non-GAAP measure.  The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company.  For corresponding reconciliation of TCE to a GAAP financial measure see Reconciliation of GAAP to non-GAAP data schedule.

2  Excludes investments pledged to the Federal Reserve, which is included within the liquidity investment portfolio.

3  On December 13, 2011, Discover Bank submitted a notice of termination to the administrative agent for the lenders under the $2.4 billion unsecured committed credit facility, effective December 16, 2011.  This facility was included in Undrawn Credit Facilities at November 30, 2011.

  Note:  See Glossary of Financial Terms for definitions of financial terms.

3

DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
	Quarter Ended																					Twelve Months Ended
	Nov 30, 2011			Aug 31, 2011			May 31, 2011			Feb 28, 2011			Nov 30, 2010			November 30, 2011 vs. November 30, 2010						Nov 30, 2011			Nov 30, 2010			2011 vs. 2010
TOTAL LOAN RECEIVABLES
Ending Loans 1, 2		$57,337			$54,082			$52,510			$51,663			$48,836			$8,501			17	%		$57,337			$48,836			$8,501			17	%
Average Loans 1, 2		$55,539			$53,013			$51,727			$51,488			$48,597			$6,942			14	%		$52,943			$49,909			$3,034			6	%
Interest Yield		11.56	%		11.83	%		11.93	%		12.10	%		12.24	%		(68	)	bps				11.85	%		12.20	%		(35	)	bps
Net Principal Charge-off Rate		2.81	%		3.43	%		4.42	%		5.42	%		6.58	%		(377	)	bps				3.99	%		7.57	%		(358	)	bps
Net Principal Charge-off Rate excluding PCI Loans3		3.05	%		3.63	%		4.69	%		5.64	%		6.58	%		(352	)	bps				4.24	%		7.57	%		(333	)	bps
Delinquency Rate (over 30 days) 3		2.30	%		2.35	%		2.68	%		3.44	%		3.89	%		(159	)	bps				2.30	%		3.89	%		(159	)	bps
Delinquency Rate (over 90 days) 3		1.14	%		1.17	%		1.44	%		1.88	%		2.03	%		(89	)	bps				1.14	%		2.03	%		(89	)	bps
Net Charge-off Dollars		$387			$459			$577			$689			$797			($410	)		(51	%)		$2,112			$3,780			($1,668	)		(44	%)
Loans Delinquent Over 30 Days 3		$1,200			$1,203			$1,329			$1,673			$1,902			($702	)		(37	%)		$1,200			$1,902			($702	)		(37	%)
Loans Delinquent Over 90 Days 3		$596			$599			$715			$915			$994			($398	)		(40	%)		$596			$994			($398	)		(40	%)
Allowance for Loan Loss (period end)		$2,205			$2,273			$2,632			$3,033			$3,304			($1,099	)		(33	%)		$2,205			$3,304			($1,099	)		(33	%)
Change in Loan Loss Reserves		($68	)		($359	)		($401	)		($271	)		($414	)		$346			84	%		($1,099	)		($573	)		($526	)		(92	%)
Reserve Rate 4		3.85	%		4.20	%		5.01	%		5.87	%		6.77	%		(292	)	bps				3.85	%		6.77	%		(292	)	bps
Reserve Rate Excluding PCI Loans3, 4		4.23	%		4.44	%		5.31	%		6.23	%		6.77	%		(254	)	bps				4.23	%		6.77	%		(254	)	bps
CREDIT CARD LOANS
Ending Loans		$46,639			$46,178			$44,961			$44,317			$45,157			$1,482			3	%		$46,639			$45,157			$1,482			3	%
Average Loans		$45,756			$45,343			$44,288			$45,443			$44,670			$1,086			2	%		$45,205			$45,617			($412	)		(1	%)
Interest Yield		12.36	%		12.46	%		12.57	%		12.65	%		12.68	%		(32	)	bps				12.51	%		12.79	%		(28	)	bps
Net Principal Charge-off Rate		3.24	%		3.85	%		5.01	%		5.96	%		6.95	%		(371	)	bps				4.50	%		8.08	%		(358	)	bps
Delinquency Rate (over 30 days)		2.39	%		2.43	%		2.79	%		3.59	%		4.06	%		(167	)	bps				2.39	%		4.06	%		(167	)	bps
Delinquency Rate (over 90 days)		1.20	%		1.22	%		1.51	%		1.99	%		2.12	%		(92	)	bps				1.20	%		2.12	%		(92	)	bps
Net Charge-off Dollars		$370			$440			$559			$668			$774			($404	)		(52	%)		$2,036			$3,684			($1,648	)		(45	%)
Loans Delinquent Over 30 Days		$1,117			$1,121			$1,256			$1,590			$1,831			($714	)		(39	%)		$1,117			$1,831			($714	)		(39	%)
Loans Delinquent Over 90 Days		$560			$565			$681			$882			$958			($398	)		(42	%)		$560			$958			($398	)		(42	%)
Allowance for Loan Loss (period end)		$2,070			$2,154			$2,519			$2,939			$3,209			($1,139	)		(35	%)		$2,070			$3,209			($1,139	)		(35	%)
Change in Loan Loss Reserves		($84	)		($365	)		($420	)		($270	)		($412	)		$328			80	%		($1,139	)		($558	)		($581	)		(104	%)
Reserve Rate		4.44	%		4.66	%		5.60	%		6.63	%		7.11	%		(267	)	bps				4.44	%		7.11	%		(267	)	bps
Total Discover Card Volume		$26,946			$28,455			$26,927			$25,759			$25,054			$1,892			8	%		$108,087			$98,699			$9,388			10	%
Discover Card Sales Volume		$25,033			$26,271			$24,844			$23,990			$23,219			$1,814			8	%		$100,138			$92,471			$7,667			8	%

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 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.

4 The Reserve Rate includes federal student loans held for sale.

  Note:  See Glossary of Financial Terms for definitions of financial terms.

4

DISCOVER FINANCIAL SERVICES
LOAN STATISTICS
(unaudited, in millions)
	Quarter Ended																					Twelve Months Ended
	Nov 30, 2011			Aug 31, 2011			May 31, 2011			Feb 28, 2011			Nov 30, 2010			November 30, 2011 vs. November 30, 2010						Nov 30, 2011			Nov 30, 2010			2011 vs. 2010
FEDERAL STUDENT LOANS
Ending Loans 1		$715			$738			$757			$767			$789			($74	)		(9	%)		$715			$789			($74	)		(9	%)
PRIVATE STUDENT LOANS
Ending Loans		$7,318			$4,715			$4,567			$4,545			$999			$6,319		NM				$7,318			$999			$6,319		NM
Ending PCI Loans 2		$5,250			$2,887			$2,947			$3,011			-			$5,250		NM				$5,250			-			$5,250		NM
Interest Yield		6.81	%		7.29	%		7.42	%		7.40	%		6.04	%		77		bps				7.18	%		5.75	%		143		bps
Net Principal Charge-off Rate		0.14	%		0.23	%		0.18	%		0.11	%		0.63	%		(49	)	bps				0.17	%		0.33	%		(16	)	bps
Net Principal Charge-off Rate excluding PCI Loans3		0.45	%		0.62	%		0.51	%		0.29	%		0.63	%		(18	)	bps				0.48	%		0.33	%		15		bps
Delinquency Rate (over 30 days) 3		0.63	%		0.80	%		0.55	%		0.72	%		0.50	%		13		bps				0.63	%		0.50	%		13		bps
Reserve Rate 4		0.72	%		0.92	%		0.85	%		0.42	%		1.86	%		(114	)	bps				0.72	%		1.86	%		(114	)	bps
Reserve Rate Excluding PCI Loans3,4		2.55	%		2.37	%		2.38	%		1.25	%		1.86	%		69		bps				2.55	%		1.86	%		69		bps
PERSONAL LOANS
Ending Loans		$2,648			$2,439			$2,213			$2,020			$1,878			$770			41	%		$2,648			$1,878			$770			41	%
Interest Yield		12.12	%		11.97	%		11.90	%		11.71	%		11.59	%		53		bps				11.94	%		11.41	%		53		bps
Net Principal Charge-off Rate		2.58	%		2.73	%		2.88	%		4.10	%		4.70	%		(212	)	bps				3.02	%		5.72	%		(270	)	bps
Delinquency Rate (over 30 days)		0.87	%		0.85	%		0.96	%		1.20	%		1.57	%		(70	)	bps				0.87	%		1.57	%		(70	)	bps
Reserve Rate		3.10	%		3.10	%		3.35	%		3.68	%		4.05	%		(95	)	bps				3.10	%		4.05	%		(95	)	bps

1 Federal Student Loans are held-for-sale as of November 30, 2010.

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 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.

4 The Reserve Rates for private student loans have been revised.

  Note:  See Glossary of Financial Terms for definitions of financial terms.

5

DISCOVER FINANCIAL SERVICES
SEGMENT RESULTS
(unaudited, in millions)
	Quarter Ended																					Twelve Months Ended
	Nov 30, 2011			Aug 31, 2011			May 31, 2011			Feb 28, 2011			Nov 30, 2010			November 30, 2011 vs. November 30, 2010						Nov 30, 2011			Nov 30, 2010			2011 vs. 2010
DIRECT BANKING
Interest Income		$1,620			$1,599			$1,573			$1,553			$1,499			$121			8	%		$6,345			$6,146			$199			3	%
Interest Expense		360			362			380			383			375			(15	)		(4	%)		1,485			1,583			(98	)		(6	%)
Net Interest Income		1,260			1,237			1,193			1,170			1,124			136			12	%		4,860			4,563			297			7	%
Other Income		470			481			470			486			404			66			16	%		1,907			1,828			79			4	%
Revenue Net of Interest Expense		1,730			1,718			1,663			1,656			1,528			202			13	%		6,767			6,391			376			6	%
Provision for Loan Losses		319			100			176			418			383			(64	)		(17	%)		1,013			3,207			(2,194	)		(68	%)
Total Other Expense		635			609			604			561			591			44			7	%		2,409			2,056			353			17	%
Income Before Income Taxes		$776			$1,009			$883			$677			$554			$222			40	%		$3,345			$1,128			$2,217			197	%
Net Interest Margin		9.10	%		9.26	%		9.15	%		9.22	%		9.28	%		(18	)	bps				9.18	%		9.14	%		4		bps
Pretax Return on Loan Receivables		5.60	%		7.55	%		6.78	%		5.33	%		4.57	%		103		bps				6.32	%		2.26	%		406		bps
PAYMENT SERVICES
Interest Income		$-			$-			$-			$-			$-			$-		NM				$-			$-			$-		NM
Interest Expense		-			-			-			-			-			-		NM				-			-			-		NM
Net Interest Income		-			-			-			-			-			-		NM				-			-			-		NM
Other Income		76			71			74			77			68			8			12	%		298			267			31			12	%
Revenue Net of Interest Expense		76			71			74			77			68			8			12	%		298			267			31			12	%
Total Other Expense		34			33			31			34			37			(3	)		(8	%)		132			126			6			5	%
Income Before Income Taxes		$42			$38			$43			$43			$31			$11			35	%		$166			$141			$25			18	%

  Note:  See Glossary of Financial Terms for definitions of financial terms.

6

Discover Financial Services

Glossary of Financial Terms

Book Value per share represents total equity divided by ending common shares outstanding.

Capital Ratios are regulatory measures used to evaluate capital adequacy. To be considered "well-capitalized," total risk-based, tier 1 risk-based, and tier 1 leverage ratios of 10%, 6% and 5% respectively must be maintained. Total Risk Based Capital Ratio represents total capital divided by risk-weighted assets. Tier 1 Capital Ratio represents tier 1 capital divided by risk-weighted assets. Tier 1 Leverage Ratio represents tier 1 capital divided by average total assets.

Delinquency Rate (Over 30 Days) represents loans delinquent over thirty days divided by ending loans (total or respective loans, as appropriate).

Delinquency Rate (Over 90 Days) represents loans delinquent over ninety days divided by ending loans (total or respective loans, as appropriate).

Earnings Per Share represents net income allocated to common stockholders divided by the weighted average common shares outstanding.

Effective Tax Rate represents tax expense divided by income before income taxes.

Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period.

Liquidity Investment Portfolio represents cash and cash equivalents (excluding cash-in-process) and other investments.

Net Income Allocated to Common Stockholders represents net income less (i) dividends and accretion of discount on shares of preferred stock and (ii) income allocated to participating securities.

Net Interest Margin represents net interest income (annualized) divided by average total loans for the period.

Net Principal Charge-off Rate represents net principal charge-off dollars (annualized) divided by average loans for the reporting period.

Pretax Return on Loan Receivables represents income before income taxes (annualized) divided by total average loans for the period.

Proprietary Network Volume represents gross proprietary sales volume on the Discover Network.

Reserve Rate represents the allowance for loan losses divided by total loans.

Return on Equity represents net income (annualized) divided by average total equity for the reporting period.

Tangible Assets represents total assets less goodwill and intangibles.

Tangible Common Equity ("TCE"), a non-GAAP financial measure, represents total common equity less goodwill and intangibles. The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of GAAP to Non-GAAP Data schedule.

Tangible Common Equity/Net Loans,a non-GAAP measure,represents total common equity less goodwill and intangibles divided by total loans less the allowance for loan loss (period end).

Tangible Common Equity per Share,a non-GAAP measure,represents total common equity less goodwill and intangibles divided by ending common shares outstanding.

Tangible Common Equity/Tangible Assets, a non-GAAP measure,represents total common equity less goodwill and intangibles divided by total assets less goodwill and intangibles.

Undrawn Credit Facilities represents asset-backed conduit funding facilities, committed unsecured credit facility and Federal Reserve discount window (excluding investments pledged to the Federal Reserve, which are included within the liquidity investment portfolio).

Discover Financial Services
Reconciliation of GAAP to Non-GAAP Data
(unaudited, in millions)
	Quarter Ended
	Nov 30, 2011			Aug 31, 2011			May 31, 2011			Feb 28, 2011			Nov 30, 2010
GAAP Total Common Equity		$8,242			$8,006			$7,523			$6,899			$6,457
Less: Goodwill		(255	)		(255	)		(255	)		(255	)		(255	)
Less: Intangibles		(188	)		(190	)		(192	)		(194	)		(189	)
Tangible Common Equity		$7,799			$7,561			$7,076			$6,450			$6,013
GAAP Book Value per share		$15.59			$14.88			$13.79			$12.65			$11.85
Less: Goodwill		(0.48	)		(0.47	)		(0.47	)		(0.47	)		(0.47	)
Less: Intangibles		(0.36	)		(0.36	)		(0.35	)		(0.35	)		(0.34	)
Tangible Common Equity per share		$14.75			$14.05			$12.97			$11.83			$11.04

Tangible common equity ("TCE"), a non-GAAP financial measure, represents common equity less goodwill and intangibles.  A reconciliation of TCE to common equity, a GAAP financial measure, is shown above.  Other financial services companies may also use TCE and definitions may vary, so we advise users of this information to exercise caution in comparing TCE of different companies.  TCE is included because management believes that common equity excluding goodwill and intangibles is a more meaningful measure to investors of the true net asset value of the company.

7