Discover Financial Services 8K The following slides are part of a presentation by Discover Financial Services (the "Company") and are intended to | DFS 10 Nov 08

Merrill Lynch

Banking & Financial

Services Conference

November 11, 2008

Exhibit 99.1

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 may include certain non-GAAP financial measures. The reconciliations of such

measures to the comparable GAAP figures are included in the Company’s Form 10-K for the year ended

November 30, 2007 and the Company’s Form 10-Q for the quarter ended August 31, 2008, each of which is on file

with the SEC and available on the Company’s website at www.discover.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 –

Regulatory Matters" 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, 2007, and “Risk Factors”

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 May 31, 2008

and August 31, 2008, which are on file with the SEC.

Certain historical financial information about the Company that we have included in this presentation has been

derived from Morgan Stanley’s consolidated financial statements and does not necessarily reflect what our financial

condition, results of operations or cash flows would have been had we operated as a separate, stand-alone

company during the periods presented.

Notice

Positioned For Value Creation

U.S. Card

•

Conservative growth strategy/prime customer focus

•

Superior relative credit risk performance

•

Leading rewards program/customer service

•

Tenured, loyal customer base

Payments

•

Over 250% volume increase over past four years

•

Strong position in U.S. debit via PULSE

•

Dramatic increase in U.S. merchant acceptance

•

International acceptance and volume through Diners Club

Liquidity & Funding

•

Multiple sources of financing and liquidity

•

Discover Bank is well-capitalized

Visa/MasterCard Litigation Settlement

•

Positive earnings impact/strengthen capital base

•

Initiatives to build global business

What Has Changed Since November 2007

Economy

•

Negative GDP growth in 3Q08

•

Unemployment/Underemployment

•

Bankruptcy filings

•

Consumer confidence

•

Consumer liquidity

•

Home price deflation

Capital Markets

•

CDO/ABCP market disruptions

•

Financial services company

issues

–

Bear Stearns

–

Fannie/Freddie

–

Lehman Brothers

–

AIG

•

Credit markets freeze

•

U.S. government intervention

Actions Discover Has Taken

Card Issuing

•

Controlled growth &

line management

•

Further tightened

credit criteria &

strengthened

collections

•

Strengthened loss

reserves –

added

$330MM YOY

•

Sold $4Bn UK

issuing business

Payments Businesses

•

Building-out U.S.

acceptance –

signed

all major acquirers

•

Acquired Diners Club;

platform for global

acceptance

•

Expanding third-party

issuing

Capital and Funding

•

Capital level has

grown –

tangible

equity ratio 11.2%

•

Increased liquidity

pool to $9.6Bn

•

Expanded direct-to-

consumer deposits to

$5Bn

•

Settled V/MA

litigation for $2.75Bn

Note(s):

Loss reserves, tangible equity ratio and liquidity pool figure as of August 31, 2008

Unique Business Model

•

Discover

is the only card

issuer that operates global

payment networks with both

credit and debit capabilities

•

Discover Network

supports

the U.S. card & third-party

issuing businesses

•

Strong position in U.S. debit

via PULSE

•

International acceptance

through Diners Club

Card

U.S.

Issuing

Credit

Debit

International

American Express

Visa

MasterCard

First Data/STAR

Metavante/NYCE

Citi

Bank of America

JPM Chase

Capital One

Networks

Distinctive Brand and Leader in Cash

Rewards

Unaided Issuer Brand Awareness

Source: GfK

Arbor,

3Q08

data

Citi

AMEX

JPM

Chase

BofA

Capital

One

Household Ownership of

Cash Rewards Cards

Source:

2007

TNS Consumer Card Strategies

Research

Program

45%

13%

15%

14%

17%

23%

26%

30%

60%

63%

AMEX

Capital

One

Chase

Citi

BofA

World Class Customer Service

Customer Service Experience

68%

87%

66%

82%

95%

82%

First Call Resolution

(1)

Calls Resolved

Overall Customer

Satisfaction

Avg Call

Center

Measure

•Call centers in-house; on-shore

•46% of agents tenured over

3 years

•More than 90% of agent handled calls

answered within 60 seconds

•280MM customer interactions per year

through primary channels

•

#1 in Customer Loyalty

–

Brand Keys, 1998-2008

•

World Class Customer

Satisfaction Award

–

Service Quality Measurement

Group, 2006-2008

•

Top Tier Customer Service

–

J.D. Power and Associates,

2007 & 2008

•

#1 Web Site in Overall

Satisfaction

–

Keynote

Systems

–

2006

2007

Customer Service Awards

Note(s):

(1)

2007 Service Quality Benchmarking Report, Service Quality Measurement Group

-5%

10%

15%

20%

25%

2005

2006

2007

3Q08

Chase

Capital One

AMEX

BofA

Citi

U.S. Receivables Growth

Note(s):

(1)

U.S. Card

(2)

Card Services

(3)

U.S. Consumer Card

(4)

N.A. Cards

Managed Receivables (YOY)

Source:

SEC Filings

(3)

(2)

(4)

(1)

58%

46%

58%

60%

73%

79%

Citi

BofA

Chase

AMEX

Capital

One

Favorable Relative Portfolio Positioning

Note(s):

(1)

Master Trust balances as of 9/16/08; based on receivables

(2)

Weighted average tenure of the receivables that are assets of the Chase Issuance Trust

(3)

Based on July 2008 calendar year YTD average

(4)

Excludes Discover Financial Services and American Express

(5)

Represented by Chase’s CHAIT Master Trust % of accounts outstanding

(2)

Distribution of Receivables

(1)

Portfolio Tenure

(1)

> 5 Years

(two

states

with

the

highest

mortgage

foreclosure

rates

)

Cardmember Attrition

(3)

4.1%

7.2%

U.S. Industry Average

(4)

Source:

Cardweb’s July 2008 Monthly Survey and Company data

(5)

12%

13%

15%

14%

17%

16%

18%

19%

22%

26%

10%

22%

Chase

Capital

One

Citi

BofA

AMEX

California

Florida

Strong Relative Credit Performance

Source:

SEC Filings

Managed

30+

Day

Delinquency

Rate

(1)

Note(s):

(1)

Discover fiscal year, all others calendar year

(2)

U.S. Card

(3)

Card Services

(4)

N.A. Cards

Source:

SEC Filings

Managed

Net

Charge-Off

Rate

(1)

(2)

(3)

(4)

(2)

(3)

(4)

Note(s):

(1)

Discover fiscal year, all others calendar year

(2)

U.S. Card

(3)

Card Services

(4)

U.S. & Intl.

(2)

2005

2006

2007

1Q08

2Q08

3Q08

Chase

Capital One

AMEX

BofA

Citi

2005

2006

2007

1Q08

2Q08

3Q08

Chase

Capital One

AMEX

BofA

(2)

•

Unemployment levels

•

Housing prices

•

Energy costs

•

Consumer credit availability

U.S. Credit Outlook

Future loss rate factors:

•

4Q08 managed net charge-

off rate approaching 5.5%

•

1Q09 managed net charge-

off rate approaching 6%

Future loss rate estimates:

•

$5Bn volume in third quarter

(2)

–

Platform for global acceptance

–

185 countries/territories

$60

$70

$86

$104

$79

$146

$163

$186

$212

$94

$96

2004

2005

2006

2007

2008

(1)

$ Volume On Our Networks

V/MA

Antitrust

ruling

(Bn)

•

$104Bn debit card volume

–

Over 4,500 issuers

–

28% volume growth

–

2.6Bn transactions

•

$6Bn third-party issuer volume

–

Over 30 issuers

–

25% volume growth

Notes:

(1)

Trailing four quarters ending 3Q08

(2)

Acquisition completed June 30, 2008; volume for two months

•

$96Bn Discover Card proprietary

volume

–

4% volume growth

Achieving Broad U.S. Merchant Acceptance

Sample Third-Party

Acquirers Signed

New acceptance model:

•

Maintain direct relationships with

larger merchants

•

Leverage merchant acquirers to reach

small to mid-size merchants

Merchant acceptance progress:

•

Agreements in place with 88 acquirers;

~98% of U.S. volume

(1)

•

175,000 merchants signed per month

(2)

•

New merchant boardings up 93%

(fiscal YTD)

Notes:

(1)

Bankcard volume

(2)

Monthly average in 3Q08

Achieving International Acceptance & Volume

Sample Diners Club

Global Issuers

Higher network volume, revenue and

profits:

•

44 global issuer licensees

•

Premium positioning, high

average spending

•

Opportunity for new

international partnerships

Network interoperability targeted for 2010:

•

Diners Club doubles global merchant

acceptance for Discover Network Cards

•

Inbound Diners Club volume on

Discover Network

Notes:

(1)

Includes retained subordinate tranches

Funding at August 31, 2008

•

Deposits

–

Cost effective

–

Strong availability

–

Growing direct deposits business

•

Public ABS

–

Tight market

–

Higher spreads

–

$2.9Bn in 2009 maturities

•

Private ABS (bank conduits)

–

Six global top-tier banks

–

$1.5Bn open capacity

Deposits

($27Bn, 47%)

Term ABS

(1)

($23Bn, 41%)

Private ABS

($5Bn, 9%)

Other

($2Bn, 3%)

Funding Sources

Funding Mix

Deposit Funding

•

Brokered deposits distributed through top tier U.S. wealth management

firms

•

Direct-to-consumer deposit issuance continues to grow

–

Added $1Bn in 3Q08

•

Extending CD maturities

–

Average maturity at 27 months vs. 22 months at prior quarter

Deposit Growth

At Spin

(Bn)

June 2007

Aug 2008

Change

% Incr

Brokered Deposits

$16.1

$19.8

$3.7

23%

Direct-to-Consumer

2.5

4.8

2.3

92%

Sweeps/Other

1.7

2.2

0.5

30%

Total Deposits

$20.3

$26.8

$6.5

32%

9.4%

11.2%

6/30/2007

Spin-off

3Q08

Capital Management

Tangible Equity/Net Managed

Receivables

Capital Management

•

Capital ratio has strengthened

since spin-off

–

Solid earnings

–

Sale of U.K. business

•

Quarterly dividends of $0.06 per

share since spin-off

•

Unchanged long-term ratings at

Discover Bank

–

Fitch

BBB

–

Moody’s

Baa2

–

S&P

BBB

•

Tangible equity has grown from $4.8Bn at

spin-off to $5.5Bn at August 31, 2008

Visa/MasterCard Litigation Settlement

$2.75 billion settlement agreement in antitrust dispute:

•

$862MM in 4Q08

•

Expect $472MM per quarter in 2009

(1)

Use of proceeds:

•

Positive earnings impact/strengthen capital base

–

Shift to on-balance sheet funding

–

Credit trends

•

Initiatives to build global business

–

Broadening acceptance

–

Expanding network volume

–

Enhancing brand recognition

–

Growing deposit franchise

Notes:

(1)

Based

upon

achieving

certain

performance

levels

network

sales

volumes

Positioned For Value Creation

U.S. Card

•

Conservative growth strategy/prime customer focus

•

Superior relative credit risk performance

•

Leading rewards program/customer service

•

Tenured, loyal customer base

Payments

•

Over 250% volume increase over past four years

•

Strong position in U.S. debit via PULSE

•

Dramatic increase in U.S. merchant acceptance

•

International acceptance and volume through Diners Club

Liquidity & Funding

•

Multiple sources of financing and liquidity

•

Discover Bank is well-capitalized

Visa/MasterCard Litigation Settlement

•

Positive earnings impact/strengthen capital base

•

Initiatives to build global business

Q&A

Discover Financial Services (DFS) 8-KThe following slides are part of a presentation by Discover Financial Services (the "Company") and are intended to