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): September 9, 2014

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:

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

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

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

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

Item 7.01 Regulation FD Disclosure.

Discover Financial Services (“Discover”) previously announced that Mark Graf, executive vice president and chief financial officer of Discover, will present at the Barclays Global Financial Services Conference in New York on Tuesday, September 9, 2014, at 12:00 p.m. Eastern time.

The information contained in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, is furnished pursuant to Item 7.01 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	Discover Financial Services Barclays Global Financial Services Conference Presentation dated September 9, 2014

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: September 9, 2014	By:	/s/ D. Christopher Greene
		Name:	D. Christopher Greene
		Title:	Vice President, Deputy General Counsel and Assistant Secretary

EXHIBIT INDEX

Exhibit No.	Description
99.1	Discover Financial Services Barclays Global Financial Services Conference Presentation dated September 9, 2014

EX-99.1

Mark Graf

EVP & Chief Financial Officer

September 9, 2014

Barclays 2014 Global Financial Services Conference

©2014 DISCOVER FINANCIAL SERVICES

Exhibit 99.1

Notice

The following slides are part of a presentation by Discover Financial Services (the "Company") and are intended to be viewed as

part of that presentation. No representation is made that the information in these slides is complete.

The

information

provided

herein

includes

certain

non-GAAP

financial

measures.

The

reconciliations

of

such

measures

to

the

comparable GAAP figures are included at the end of this presentation, which is available on the Company's website at

www.discoverfinancial.com.

The presentation contains forward-looking statements. You are cautioned not to place undue reliance on forward-looking

statements, which speak only as of the date on which they are made, which reflect management’s estimates, projections,

expectations or beliefs at that time, and which are subject to risks and uncertainties that may cause actual results to differ

materially. For a discussion of certain risks and uncertainties that may affect the future results of the Company, please see "Special

Note

Regarding

Forward-Looking

Statements,"

"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 December 31, 2013 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 March 31, 2014 and June 30, 2014, which

are available on the Company’s website and the SEC’s website. The Company does not undertake to update or revise forward-

looking statements as more information becomes available.

We own or have rights to use the trademarks, trade names and service marks that we use in conjunction with the operation of our

business,

including,

but

not

limited

to:

Discover

®

,

PULSE

®

,

Cashback

Bonus

®

,

Discover

Cashback

CheckingSM,

Discover

it

®

,

Discover

®

Network

and

Diners

Club

International

®

.

All

other

trademarks,

trade

names

and

service

marks

included

in

this

presentation are the property of their respective owners.

2

SM

Executive summary

•

Gaining profitable card market share through a loyal customer base, a new

flagship product, cash rewards leadership and superior customer service

•

Growing student and personal loans while expanding other direct banking

products beyond the existing customer base

•

Leveraging payments assets to support card and other direct banking

products, in addition to partnering to build volume and acceptance over the

long-term

•

Driving superior returns and creating shareholder value through effective

capital management

3

Positioning to be the leading direct bank

U.S. Card

Issuing

•

$53Bn in card receivables

•

Leading cash rewards

program

•

1 in 4 U.S. households

Deposits and

Lending

•

$29Bn direct-to-consumer

deposits

•

$13Bn personal loans and

private student loans

•

$2.5Bn home loan

originations

•

Home equity installment

loans

•

Cashback checking

Direct Banking Strategy

•

Discover to become the leading direct

bank by leveraging our unique assets

and capabilities to grow credit card

market share and pursue other high-

return direct consumer banking

opportunities in the U.S.

•

Key Investments:

Direct Banking Segment

(97% of DFS Pre-Tax Profit)

Note(s):

Balances as of June 30, 2014; direct mortgage originations and pre-tax profit based on the trailing four quarters ending 2Q14; direct-to-consumer deposits

includes affinity deposits

–

Rewards Program

–

Customer Service

–

Mobile

–

New Banking Platform

4

U.S. Card –

Driving better loan growth and credit performance

Card Loans (%YOY)

(1)

Source:

SEC filings, calendar year data, internal estimates

Note(s):

1.

Includes weighted average card receivables growth for American Express (U.S. Card), Bank of America (U.S. Card), Capital One (U.S. Card excl. HSBC for 2Q12-1Q13 and

installment loans), Citi (Citi-branded Cards N.A.), Wells Fargo (Consumer Credit  Card Portfolio), and JPMorgan Chase (Card Services); periods prior to 3Q08 adjusted to include

estimated Washington Mutual receivables

2.

Weighted

average

rate;

includes

U.S.

card

net

charge-off

rates

for

Citi

(Citi-branded

Cards

N.A.),

JPMorgan

Chase

(Card

Services),

Capital

One

(U.S.

Card),

American

Express

(U.S. Card) and Bank of America (U.S. Card)

Card Net Charge-off Rate (%)

(2)

July 2014

2.1%

5.9%

1.0%

10.0%

5.0%

0.0%

-10.0%

-15.0%

-5.0%

12.0%

10.0%

8.0%

4.0%

0.0%

6.0%

2.0%

2Q08

2Q09

2Q10

2Q11

2Q12

2Q13

2Q14

2Q08

2Q09

2Q10

2Q11

2Q12

2Q13

2Q14

Discover

Peer Group

Discover

Peer Group

5

Strong growth in standard balances and funding cost

improvement offsetting modest yield compression

Note(s): 

1.

Pre-CARD Act reflects an average of 2006-2008 inclusive

2.

Total company interest expense divided by total company average receivables

3.

Discover card net interest margin represents credit card interest yield less total company average funding cost (total company interest expense

divided by total company average receivables)

Card Loan Mix by APR (%)

Card Net Interest Margin (%)

(1)

(2)

(3)

(1)

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

13.0%

Total Yield

Cost of Funds

Pre-CARD Act

YTD 2Q14

Pre-CARD Act

2Q14

Promotional

Standard

Cash and Other

6

NIM

25%

52%

23%

18%

69%

13%

Achieving industry leading returns

2014 YTD U.S. Card Issuers

Net

Interest

Margin

(NIM)

(1,2)

2014 YTD U.S. Card Issuers

Pre-tax, Pre-Reserve ROA

(1,3)

Note(s):

1.

American Express (U.S. Card), Capital One (U.S. Card adjusted for estimated impact of Best Buy portfolio sale), Citi (Citi-branded Cards N.A. based on segment tax rate) and 

JPMorgan Chase (Card Services)

2.

Capital

One,

Citi,

and

JPMorgan

Chase

net

interest

margins

include

late

fees,

whereas

American

Express

and

Discover

exclude

late

fees;

Discover

card

net

interest

margin

represents

credit card interest yield less total company average funding cost (total company interest expense / total company average receivables)

3.

Pre-tax

income

excluding

the

impact

of

changes

in

loan

loss

reserves

divided

by

average

card

receivables,

which

is

a

non-GAAP

measure;

see

appendix

for

Discover

GAAP

reconciliation

Source:

Public company data; Discover

12.9%

10.4%

9.9%

9.1%

9.0%

7.0%

6.7%

6.5%

6.3%

4.9%

COF

DFS

DFS

AXP

AXP

COF

C

C

JPM

JPM

(1,3)

7

Private Student Loans –

Strong organic growth with disciplined underwriting

Total Contractual

Net Charge Off Rate

(4)

Student Loan Receivables ($Bn)

(1)

(2)

% in

Repay

(3)

20%

66%

68%

68%

67%

8%

$0.6

$1.0

$2.1

$3.1

$4.0

4.3

$3.7

$5.6

$5.0

$4.5

4.2

$4.7

$7.7

$8.1

$8.5

$8.5

Purchased

Portfolios

Organic

2009

2010

2011

2012

2013

2Q14

0.03%

0.37%

0.96%

1.14%

1.28%

0.94%

2009

2010

2011

2012

2013

YTD

2Q14

8

Note(s):

1.

Contractual receivables is a non-GAAP measure; amounts represent year-end/quarter-end balances, see appendix for reconciliation

2.

Includes CitiAssist branded originated loans for 2011 and 2012

3.

Based on contractual loan data; includes loans in forbearance

4.

Defined as net losses to average managed contractual receivables

which is a non-GAAP measure for DFS; see appendix for reconciliation

Personal Loans -

Driving disciplined profitable growth

Overview

Personal Loans ($Bn)

•

Superior alternative for

consolidating debt

•

Typical installment loan

characteristics:

$5

$4

$3

$2

$1

$0

10%

8%

6%

4%

2%

0%

2009

2010

2011

2012

2013

2Q14

Total Loans Outstanding

6 Month Lagged Charge-Off Rate

–

3-5 year term

–

300-400bps rate reduction

•

Average FICO of ~750

•

~60% of portfolio has another

Discover relationship

9

Direct-to-Consumer Deposits -

Funding asset growth with deposits

Overview

Direct-to-Consumer

Deposits

($Bn)

(1)

•

Developed robust source of funding

through direct-to-consumer deposits

•

Shifting marketing mix toward

indeterminate maturity products

•

Launched Cashback Checking

-

No monthly service fees or

minimum balance

-

Mobile check deposit &

online bill pay

-

Free access to 60,000+ ATMs

-

Cashback on everyday

transactions (debit, bill pay, checks)

Note(s):

1.

Includes affinity deposits

23%

38%

46%

47%

43%

% of

Funding

44%

10

$13

$21

$27

$28

$28

$29

2009

2010

2011

2012

2013

2Q14

•

$10Bn volume

•

30+ issuers

•

$163Bn volume

•

4,000 issuers

•

$27Bn volume

•

80 licensees

•

185+ countries /

territories

Network Partners

Payments -

Increasing domestic and global acceptance

Payments Strategy

•

Our networks offer our direct bank a

unique platform for growth and

differentiation

•

Discover to become the leading

payments partner by leveraging our

capabilities, flexibility, and non-

traditional alliances to grow global

acceptance and volume

•

Key Investments:

–

EMV

–

Tokenization

–

Emerging Payments

–

Global Network

Payment Services Segment

(3% of DFS Pre-Tax Profit)

Note(s):

Volume and pre-tax profit based on the trailing four quarters ending 2Q14

11

Financial Results -

2Q14 Summary financial results

Note(s):

1.

2Q13 operating expense includes $40 million of charges related to Diners Europe

2.

Pre-tax, pre-provision income, which is derived by adding provision for loan losses to pre-tax income, is a non-GAAP financial measure which should be viewed in

addition to, and not as a substitute for, the company’s reported results.  Management believes this information helps investors understand the effect of provision for loan

losses on reported results and provides an alternate presentation of the company’s performance; see appendix for reconciliation

($MM, except per share data)

2Q14

2Q13

$

%

Revenue Net of Interest Expense

$2,172

$2,041

$131

6%

Provision for Loan Losses

360

240

(120)

(50%)

Operating

Expense

(1)

797

820

23

3%

Direct Banking

984

1,002

(18)

(2%)

Payment Services

31

(21)

52

NM

Total Pre-Tax Income

1,015

981

34

3%

Pre-Tax,

Pre-Provision

Income

(2)

1,375

1,221

154

13%

Income Tax Expense

371

379

8

2%

Net Income (Loss)

$644

$602

$42

7%

Diluted EPS

$1.35

$1.20

$0.15

13%

ROE

23%

23%

B / (W)

12

Benefiting from low provisions and controlling

expense growth

Total Expense ($Bn)

(1)

Provision for Loan Losses ($Bn)

Note(s):

1.

2012 adjusted for $216 million in legal expenses associated primarily with the CFPB and FDIC consent order; 2013 adjusted for $40 million of charges related to Diners Europe

2.   Defined as reported noninterest expense divided by total revenue (net interest income and noninterest Income)

13

$4.0

$3.0

$2.0

$1.0

$0.0

40%

30%

20%

10%

0%

Non-Interest Expense

Efficiency Ratio

(2)

2011

2012

2013

LTM

2014

Provision for

Loan Losses

Reserve Release/(Build)

2011

2012

2013

LTM 2014

$1.0

$0.9

$1.1

$1.3

$2.2

$1.7

$1.2

$0.7

$0.2

($0.3)

Driving superior returns on strong capital base

Estimated 2Q14 Basel III

Common

Equity

Tier

1

Ratio

(1)

Note(s):

1.

Common equity tier 1 (a non-GAAP measure; see appendix for reconciliation) as a percent of risk-weighted assets under Basel III; DFS is estimated fully phased in Basel III

2.

Bank holding companies participating in the 2014 Comprehensive Capital Analysis and Review (CCAR); excludes Ally Financial and Santander Holdings USA due to limited

information; excludes Discover

Return on Equity (%)

Source:

SNL, regulatory reports

Source:

Company filings, DFS internal estimates

14

15.1%

13.4%

12.7%

10.6%

10.1%

9.9%

9.8%

DFS

AXP

COF

C

WFC

BAC

JPM

26%

8%

8%

24%

2012

2013

Discover

Large Banks

(2)

Appendix

Reconciliation of GAAP to Non-GAAP data

16

6 Months Ended

(unaudited)

6/30/14

Card Pretax Return on Assets

7.2%

Card Reserve Changes

(0.2%)

Card

Pretax

Return

on

Assets

(Excluding

Reserve

Changes)

(1)

7.0%

(unaudited, $ in billions, calendar year data)

12/31/10

12/31/11

12/31/12

12/31/13

6/30/14

GAAP Recorded Balance Purchased (Private) Credit Impaired Student Loans (ending loans)

$3.1

$5.2

$4.7

$4.2

$3.9

Adjustment for Purchase Accounting

0.6

0.4

0.3

0.3

0.3

Contractual

Value

Purchased

(Private)

Credit

Impaired

Student

Loans

(ending

loans)

(2)

$3.7

$5.6

$5.0

$4.5

$4.2

GAAP Private Student Loans (ending loans)

1.0

2.1

3.1

4.0

4.3

Contractual

Value

Private

Student

Loans

(ending

loans)

(2)

$4.7

$7.7

$8.1

$8.5

$8.5

(unaudited, $ in billions, calendar year data)

12/31/10

12/31/11

12/31/12

12/31/13

6/30/14

GAAP Recorded Balance Purchased (Private) Credit Impaired Student Loans (average loans)

$0.0

$3.5

$5.0

$4.4

$4.0

Adjustment for Purchase Accounting

0.0

0.5

0.4

0.3

0.3

Contractual

Value

Purchased

(Private)

Credit

Impaired

Student

Loans

(average

loans)

(2)

$0.0

$4.1

$5.4

$4.7

$4.3

GAAP Private Student Loans (average loans)

0.9

1.7

2.6

3.6

4.3

Contractual

Value

Private

Student

Loans

(average

loans)

(2)

$0.9

$5.8

$8.0

$8.3

$8.6

(unaudited, $ in millions, calendar year data)

12/31/10

12/31/11

12/31/12

12/31/13

6/30/14

GAAP Private Student Loan Net Principal Charge-offs

$3.3

$8.1

$19.8

$46.1

$27.8

Adjustment

for

Purchased

(Private)

Credit

Impaired

Student

Loans

Net

Principal

Charge-offs

-

47.5

70.8

60.1

12.5

$3.3

$55.6

$90.6

$106.2

$40.3

Contractual Net Charge-off Rate

0.37%

0.96%

1.14%

1.28%

0.94%

Note(s):

2.

The

contractual

value

of

the

purchased

private

student

loan

portfolio

is

a

non-GAAP

measure

and

represents

purchased

private

student

loans

excluding

the

purchase

accounting

discount.

The

contractual

value

of

the

private

student loan portfolio is meaningful to investors to understand total outstanding student loan balances without the purchase accounting discount

3.

Contractual

private

student

loan

net

principal

charge-offs

is

a

non-GAAP

measure

and

include

net

charge-offs

on

purchase

credit

impaired

loans.

Under

GAAP

any

losses

on

such

loans

are

charged

against

the

nonaccretable

difference established in purchased credit impaired accounting and are not reported as charge-offs. Contractual net principal charge-offs is meaningful to investors to see total portfolio losses

1. Card pre-tax return on assets excluding loss reserve changes is a non-GAAP measure and represents the pre-tax earnings of Discover's U.S. credit card business excluding changes to the allowance for loan loss reserve. 

Card pre-tax return on assets excluding loss reserve changes is a meaningful measure to investors because it provides a competitive performance benchmark

Contractual

Private

Student

Loan

Net

Principal

Charge-offs

(3)

Reconciliation of GAAP to Non-GAAP data (cont’d)

Note(s):

1.

Pre-tax, pre-provision income, which is derived by adding provision for loan losses to pre-tax income, is a non-GAAP financial measure which should be viewed in addition to,

and

not

as

a

substitute for,

the company's reported results.

Management believes

this

information helps investors understand the effect of provision for loan losses on reported

results and provides an alternate presentation of the company's performance

2.

Common equity tier 1, a non-GAAP financial measure, represents common equity and the effect of certain items in accumulated other comprehensive income (loss) excluded

from common equity tier 1, less goodwill and intangibles. A reconciliation of common equity tier 1 to common equity, a GAAP financial measure, is shown above. Other financial

services companies may also use common equity tier 1 and definitions may vary, so we advise users of this information to exercise caution in comparing common equity tier 1 of

different

companies.

Common equity tier 1 is included to support the common equity tier 1 ratio which is meaningful to investors to assess the quality and composition of the

Company’s capital

3.

Calculations based on fully phased in Basel III

4.

Common equity tier 1 ratio is calculated using total common equity tier 1, a non-GAAP measure, divided by risk weighted assets

17

Quarter Ended

(unaudited,$ in millions)

6/30/14

6/30/13

Provision for loan losses

$360

$240

Income before income taxes

1,015

981

Pre-tax,

pre-provision

income

(1)

$1,375

$1,221

(unaudited, $ in millions)

6/30/14

Common Equity Tier 1 Capital Reconciliation

GAAP total common equity

$10,821

Effect of certain items in accumulated other comprehensive

income (loss) excluded from tier 1 common equity

73

Less: ineligible goodwill and intangible assets

(439)

Estimated

total

common

equity

tier

1

(2)(3)

$10,455

Estimated

risk

weighted

assets

(3)

$69,104

Estimated

common

equity

tier

1

ratio

(3)(4)

15.1%