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

Craig Streem

Vice President,

Investor Relations

January 29, 2009

Welcome

Exhibit 99.1

2

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 may include certain non-GAAP financial measures. The

reconciliations of such measures to the comparable GAAP figures are included in the Company’s

Form 8-K filed on December 18, 2008 and the Company’s Form10-K for the year ended November 30,

2008, 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

–

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, 2008, which is 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.

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

®

Network

and

Diners

Club

International

®

.

All

other

trademarks,

trade

names and service marks included in this presentation are the property of their respective owners.

David Nelms

Chairman &

Chief Executive Officer

January 29, 2009

Financial Community Briefing

4

Company Overview

(1)

•

Leading cash rewards program

•

6

th

largest U.S. issuer

•

Over $49Bn in managed

receivables

•

$106Bn volume

•

4,500+ issuers

•

$29Bn deposit base

•

$1.3Bn personal and student

loans

•

$102Bn volume

•

30+ issuers

Note(s):

1.

All data, including $ volumes, as of November 30, 2008

2.

Includes volume prior to acquisition

•

$31Bn volume

(2)

•

49 licensees

•

185 countries/territories

5

Financial

•

Diluted EPS from continuing operations grew 9% to $2.20

•

Credit card sales volume of $92Bn; total loans of $51Bn, up 6%

•

Managed net charge-off rate of 5.0%

•

Total volume on our networks of $221Bn, up 19%

•

Grew deposits by 15% to $29Bn

•

Continued to build liquidity and capital; tangible equity of $11.37 per share

•

Settled Visa/MasterCard litigation for $2.75Bn

Strategic

•

Sale of $4Bn UK issuing business

•

Acquisition of Diners Club; platform for global acceptance

•

Bank holding company/TARP CPP

2008 Highlights

6

Manage conservatively in a challenging environment

•

Superior credit performance vs. competitors

•

Conservative loan growth

•

Increase net interest margin and revenues

•

Reduce expenses

•

Focus on capital/liquidity/funding

Build for the future

•

Embrace new Fed rules

•

Grow direct-to-consumer deposit business

•

Leverage Discover brand and leading Rewards program

•

Increase acceptance to drive higher sales

•

Grow and integrate Diners Club/PULSE/Discover networks

Performance Priorities

7

Broaden consumer relationships

Build global network

Further strengthen foundation

Acceptance

DFS

Volume

•

Discover Card

•

Third-Party

•

US

acceptance

•

Diners Club

•

PULSE

Discover’s Strategy

DFS

Financial wallet share

Card wallet share

•

Brand preference

•

Products/features

•

Customer

experience

•

Prime lending

•

Deposits

People/

culture

Expense

base

Funding/

capital

8

Today’s Agenda

Jim Panzarino

SENIOR VICE PRESIDENT, CHIEF CREDIT RISK OFFICER

Roy Guthrie

EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER

Harit Talwar

EXECUTIVE VICE PRESIDENT, CARD PROGRAMS &

CHIEF MARKETING OFFICER

Roger Hochschild

PRESIDENT & CHIEF OPERATING OFFICER

Diane Offereins

EXECUTIVE VICE PRESIDENT, PAYMENT SERVICES

Payments

U.S. Card

Business Segment Strategies

Credit Risk Management

Financial Review

Closing Thoughts and Q&A

David Nelms

CHAIRMAN & CHIEF EXECUTIVE OFFICER

Financial Review

Roy Guthrie

Executive Vice President,

Chief Financial Officer

January 29, 2009

10

Financial Focus

•

Earnings

•

Funding

•

Capital

11

Financial Performance

(1)

Note(s):

1.

Continuing operations on a managed basis

2.

Includes

$862.5

million

related

to

payment

received

from

MasterCard

as

payment

in

full

of

its

portion

of

the

Visa

and

MasterCard

antitrust

litigation

settlement

3.

As

a

percent

of

average

total

loans

-

managed

(MM)

$

$

$

bps

(3)

Net Interest Income

$4,189

$3,638

$551

80

Other Income

2,090

2,220

(130)

(47)

Visa/MasterCard

Settlement

(2)

863

-

863

176

Revenue Net of Interest Expense

7,142

5,857

1,285

209

Total Provision for Loan Losses

3,069

1,853

(1,215)

(231)

Total Expense

2,416

2,478

62

35

Pretax Income

1,658

1,526

132

13

Net Income

$1,063

$964

$99

11

Diluted EPS from Continuing Operations

$2.20

$2.01

$0.19

90

2008

2007

2008 vs. 2007 B/(W)

12

Net Interest Margin

•

Level yield reflects impact of declining Prime offset by marketing actions

•

Net interest margin improvement driven by improving cost of funds

8.56%

7.76%

12.65%

4.09%

5.08%

12.84%

+80 bps

Note(s):

1.

Interest expense less investment income as a percent of average managed receivables

0

2

4

6

8

10

12

14

4Q07

4Q08

Prime

Managed Interest Yield

Cost

of

Funding

(1)

%

13

Other Income

Visa/MasterCard Antitrust Settlement Proceeds

(MM)

Note(s):

1.

Payments from Visa will be up to these amounts, which are contingent upon Discover achieving certain financial measures

2.

We entered into an agreement with Morgan Stanley at the time of our spin-off to give us sole control over the prosecution and settlement of the Visa/MasterCard antitrust litigation

and to determine how proceeds from the litigation would be shared.  We have notified Morgan Stanley that it breached the agreement and the amount due to Morgan Stanley, if

any, is a matter of dispute.  The dispute is a subject of litigation between the parties.

2008

4Q

1Q

2Q

3Q

4Q

Total

MasterCard

$863

Visa

(1)

$472

$472

$472

$472

$1,888

After Tax

535

293

293

293

293

1,170

Minimum

Residual

Capital

Impact

(2)

$62

$293

$235

$146

$146

$820

2009

14

Loan Loss Provisions

Total Provision Change (MM)

$2.6Bn in

ABS mat.

Loss Guidance Update

•

1Q09 managed charge-off rate

anticipated in mid-6% range

•

2Q09 managed charge-off rate

anticipated above 7%

•

1Q09 expect continued reserve

build due to credit conditions

•

On-balance sheet loans expected to

grow due to maturing ABS

5.48%

3.85%

+382bps

•

Total provision increased to 8.77% of

managed receivables in 4Q08 from

4.95% in 4Q07

454

691

130

300

115

$584

$1,106

4Q07

4Q08

Net Charge-offs

Reserve Build

ABS Maturities

15

Expense Management

Non-interest Expense as a % of Loans

(1)

5.56%

5.28%

4.93%

2006

2007

2008

Note(s):

1.

Managed basis

•

Refine account acquisition strategy

and reduce marketing spend

•

Optimize customer service

–

Migrate activities to lower

cost channels

–

Increase on-line customer base

•

Continued focus on discretionary

spend, e.g., professional services

•

Headcount management

Expenses reduced in 2008 and will

be driven further down in 2009:

Initiatives

16

Managed Balance Sheet

(Bn)

2008

2007

Assets

Cash and Cash Equivalents

$10.2

$8.1

Loan Receivables, Net

49.7

47.4

Other Assets

5.7

10.3

Total Assets

$65.6

$65.8

Liabilities and Equity

Asset-Backed Securitization

$25.7

$27.0

Deposits

28.5

24.7

Other Liabilities

5.5

8.5

Total Liabilities

59.7

60.2

Total Equity

5.9

5.6

Total Liabilities and Equity

$65.6

$65.8

17

Funding Environment

0

1

2

3

4

5

6%

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

1-Month LIBOR

Fed Funds Target Rate

1 Month Libor (1ML) and Fed Funds Target Rate

•

1ML to Fed Funds Target rate gap has improved

•

ABS market still effectively closed

•

Term Asset-Backed Securities Loan Facility (TALF) expected to begin in

February

18

0

1

2

3

4

5%

3Q08

4Q08

Discover Direct-to-Consumer 3 Year Posted Rate

Fed Funds Target

Deposit Funding Environment

•

Insured deposit markets remain robust

•

Deposit rates have lagged market rates, but have made

substantial moves in the last 45 days

2.72%

3.52%

2.97%

19

5.1

8.3

9.4

2.4

1.9

1.5

2.5

2.5

2.4

5.2

$18.5

$10.0

$12.7

Jun-07

4Q07

4Q08

Cash Liquidity

Conduit Open Capacity

Committed Credit Facility

Fed Discount Window

Maturities and Liquidity

Cash and Contingent Liquidity (Bn)

Maturities (Bn)

Note(s):

1.

Includes conduit issuance and maturities

•

‘08 issuance of $22Bn, including $16Bn of CDs  

(‘07 issuance of $27Bn, including $18Bn of CDs)

7.7

5.1

10.3

9.9

7.7

7.9

$17.6

$12.8

$18.2

2008

2009

2010

ABS

CDs

(1)

20

$5.3

$5.5

$1.2

4Q07

4Q08

Capital Management

Capital Management

Pro forma 2008

DFS Tangible Capital (Bn)

•

Long-term ratings at Discover Bank

–

Fitch

BBB

–

Moody’s

Baa2; negative outlook

–

S&P

BBB

•

Discover Bank remains

well capitalized

(3)

–

Total capital ratio

12.9%

–

Tier 1 capital ratio  11.5%

•

Preliminary approval to receive $1.2Bn

under TARP CPP; expected to support

on-balance sheet growth

TARP

CPP

(1)

Note(s):

1.

Receipt

of

CPP

funds

subject

to

U.S.

Treasury

final

approval

and

closing

conditions

2.

As originally reported

3.

As of November 30, 2008

TE/MR =

10.2%

(2)

TE/MR =

11.0%

21

$46.0

$44.4

$45.8

$48.2

$51.1

$18.9

$20.6

$20.8

$20.8

$25.2

2004

2005

2006

2007

2008

Owned Loans

Managed Loans

Prudent Loan Growth

Owned vs. Managed Loans (Bn)

Credit Risk Management

James Panzarino

Senior Vice President,

Chief Credit Risk Officer

January 29, 2009

•

The external environment has worsened significantly since last year

–

Severe stress in labor markets

–

Low consumer and business confidence

–

Rising industry delinquency and bankruptcy

•

DFS has maintained a competitive advantage in

credit risk management

–

Portfolio composition well positioned

–

Significant investments and enhancements in

credit risk management

–

Strong relative credit performance in 2008

Credit Risk Overview

23

Unemployment Rate

Underemployment

3,500

4,500

5,500

6,500

7,500

8,500

Number of Persons Working Part-Time due to Economic Reasons

Stress in Labor Market

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Source

Bureau of Labor Statistics

Source

Bureau of Labor Statistics

24

Consumer Confidence

Consumer Confidence Declining

0

20

40

60

80

100

Source

Economy.com

25

YOY Growth in U.S. Bankruptcy

Filings (Sep-Nov 2007 vs. Sep-Nov 2008)

Bankruptcies

Source

National

Bankruptcy

Research

Center

•

Bankruptcies have

grown faster in

states with

housing-

related

stress

YOY change 50%-100%

YOY change 25%-50%

YOY change 15%-25%

YOY change <15%

35% is the national average

YOY change >100%

FL

NM

MD

TX

OK

KS

NE

SD

ND

MT

WY

CO

UT

ID

AZ

NV

WA

CA

OR

KY

NY

PA

MI

NH

MA

CT

VA

WV

OH

IN

IL

NC

TN

SC

AL

AR

LA

MO

IA

MN

WI

GA

MS

VT

NJ

DE

ME

RI

AK

26

DFS Portfolio Composition

> 5 Years

Source:

Master Trust Receivables

Note(s):

Data as of:

Discover: May-08, Citi: Mar-08, BofA: Mar–08, AMEX: Aug-08, Chase: Sep-08, Capital One: Mar-08

27

Geography

Tenure

79%

73%

60%

58%

46%

55%

Citi

BofA

AMEX

Chase

Capital

One

10%

13%

12%

15%

14%

17%

6%

6%

7%

8%

9%

16%

18%

19%

22%

26%

6%

22%

Chase

Capital

One

Citi

BofA

AMEX

California

Florida

Risk Management Initiatives

28

Underwriting

Models &

Criteria

Verification &

Judgmental

Underwriting

Management

of Contingent

Liability

Line

Management

Decision

Science

Capabilities

Initial Line

Assignment

Credit

Strategies

$5,850

$5,500

4Q07

4Q08

New Account Acquisition

Through-the-Door Population

Average Assigned Line

Source:  Internal Data

29

727

734

4Q07

4Q08

Average Booked FICO

Source:  Internal Data

Portfolio

Line Management

4Q 2007

4Q 2008

-25% YOY

Line Increase Dollars

Line Decrease Dollars

4Q 2007

4Q 2008

+196% YOY

30

Source:  Internal Data

$62

$83

Dec-07

Dec-08

0

1,000

2,000

3,000

4,000

5,000

6,000

2Q08

3Q08

4Q08

1Q09E

Portfolio

Management of Contingent Liability

Inactive Account Closures (000)

Inactive Contingent Liability (Bn)

31

Source:  Internal Data

Collections

Activities

32

Refined

Collection

Models

Payment

Program

Enrollment

Collections

Website

Expanding

email servicing

capability

Authorizations

Optimizing

Outbound IVR

Utilization

Collections

Strategies

Help

Help

customers

customers

regain

regain

control

control

and

and

identify

identify

options

options

that

that

work

work

for

for

them

them

33

Vision

Vision

To be the most rewarding

relationship consumers and

businesses have with a

financial services company

Mission

Mission

To help people spend smarter,

manage debt better and save

more so they achieve a brighter

financial future

Tools

Tools

2,300 in-house collection associates

Flexible payment solutions

Credit counseling

Sophisticated analytics

Diverse communication channels

Collections

Activities

Strong Relative Credit Performance

Source:  SEC Filings

Managed Net Charge-off Rate

34

Managed Net

Charge-off Rate –

YOY %

Source:  SEC Filings

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2003

2004

2005

2006

2007

2008

Industry

-60%

-40%

-20%

0%

20%

40%

60%

80%

2004

2005

2006

2007

2008

Industry

•

The external environment is challenging

•

Prior years’

actions have positioned DFS portfolio for

these challenges

•

We continue to be proactive and make investments in credit risk

management and collections

•

We are focused on maintaining our strong relative

credit performance in 2009

Summary

35

Roger Hochschild

President &

Chief Operating Officer

January 29, 2009

Business Segment Strategies

37

Manage conservatively in a challenging environment

•

Superior credit performance vs. competitors

•

Conservative loan growth

•

Increase net interest margin and revenues

•

Reduce expenses

•

Focus on capital/liquidity/funding

Build for the future

•

Embrace new Fed rules

•

Grow direct-to-consumer deposit business

•

Leverage Discover brand and leading Rewards program

•

Increase acceptance to drive higher sales

•

Grow and integrate Diners Club/PULSE/Discover networks

Performance Priorities

38

•

Provide consumer reasonable time to make a payment (statements mailed

21 days before payment due date)

•

Payments above minimum allocated to highest rate balance first or pro-rata

among all balances

•

Issuer may only increase APR for:

–

New balances or accounts

–

Accounts more than 30 days delinquent

–

Variable rate accounts

•

Two-cycle billing eliminated

•

New disclosures on monthly statements, account agreements and

advertising/solicitation materials

Summary of Federal Reserve Credit Card Rules

Effective July 1, 2010

39

Introduces new challenges for the industry

•

Potential negative impact on net interest margin

•

Significant systems/operational changes

However, Discover is embracing the new rules

•

Aligns with our mission of brighter financial future and focus on prime lending

•

Already in compliance with some of the new rules -

finishing implementation

of two-cycle billing changes in 2Q09

Potential for longer term benefits to the industry

•

Reduce industry reliance on promotional rates and low new account pricing

•

Reduction in balance transfer volume and churn

•

May also lead to lower long-term loan losses

Impact of New Fed Rules

40

Grow Direct-to-Consumer Deposits Business

•

~60% of direct-to-

consumer balances from

Cardmembers

•

Discover Card debit active

population less than

1% penetrated

•

Emphasis on building

awareness/marketing

–

Discover Card

Account Center

–

E-mail solicitations

–

Statement inserts

–

Targeted direct mail

Affinities / Partnerships

•

Roughly 15% of

overall direct-to-

consumer balances

•

CDs & CD IRAs

more than 90% of

accounts &

balances

•

Largest affinity

relationship, AAA,

generated over

$600 million in

deposits

in 2008

Broad Market

•

Represents about

25% of overall

direct-to-consumer

balances

•

New public website,

online application

form, and CD IRA

product introduced

in 2008

•

Average per-

customer deposits

comparable with

cross-sell portfolio

41

Direct-to-Consumer Deposits Portfolio

As of November 30, 2008

36%

31%

33%

•

6-month to 2-year CDs

•

Average renewal-weighted life of 6.1 years

•

Economics dependent on successful

renewal programs

Medium-term Time Deposits

•

Primarily Money Market and

3-month CDs

•

Average renewal-weighted

life of 2.9 years

•

More rate sensitive

Liquid

•

30-month to

10-year CDs

•

Average renewal-

weighted life of

10.4 years

•

Consistently cost-

effective relative to

brokered

CD alternatives

•

High demand in

IRAs and affinity/

partnership portfolios

Long-term Deposits

42

Priorities

Growth in Deposits (Bn)

Direct-to-Consumer Priorities

•

Create best-in-class

customer experience

•

Expand product suite

•

Grow time deposits to

improve maturity balance

•

Increase Discover deposits

advertising/marketing

$4.8

$6.1

$3.8

$3.2

$3.0

$2.7

$2.5

$2.4

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

43

Business Segment Presentations

New executive roles:

Harit

Talwar:

Executive

Vice

President,

Card

Programs

&

Chief Marketing Officer

Diane

Offereins:

Executive

Vice

President,

Payment

Services

U.S. Card

Harit Talwar

Executive Vice President,

Card Programs & 

Chief Marketing Officer

January 29, 2009

45

U.S. Card –

Mission/Strategy

To help people

spend smarter,

manage debt better

and

save

more

so they achieve a

brighter financial future

Marketing Strategy

•

Continue to manage and grow

business conservatively in both

customer acquisition and

portfolio management

•

Continue to invest in and leverage

core franchise strengths:

–

Rewards leadership

–

Loyal customer base

–

Customer experience

–

Merchant relationships

–

Brand

46

•

Fewer new accounts as we tighten credit universe and profitability scores

•

Higher yielding accounts and reduced reliance on promotional pricing

•

More engaged customers by leveraging the value of the Cashback Bonus

®

program

New Account Acquisition

Results (2008 vs. 2007)

•

3 Month Active Rate

+ 5%

•

Year 1 Yield

+81%

47

7.76%

8.55%

4Q07

4Q08

2007

2008

Portfolio Management

•

Improving portfolio profitability

–

Balance transfer volume,

duration and pricing

–

Acquisition and portfolio offers

•

Widening spend margin

–

Higher customer activity

–

Introducing premium products

–

Optimizing rewards program

Net Interest Margin

(1)

Spend Margin

(2)

+10%

Note(s):

1.

Managed basis

2.

Merchant based revenue less network expenses and rewards costs

48

•

40% of the calendar 4th quarter decline due to lower gasoline prices

•

Additional impact from the apparel and home improvement categories

Key Levers

•

Appropriate credit line strategy

•

Expanding acceptance

•

Rewards leadership

Sales Volume Update

Calendar 4th quarter sales decline of 5% YOY, driven by a 7%

decline in December

49

Rewards Leadership

5% Cashback Bonus

®

Program

Sales & Enrollments

•

Ongoing innovations to help

cardmembers earn more

rewards and receive higher

value redemptions

•

Continue to drive simplicity,

control and engagement for

the cardmember

•

Integrated in every

customer touch point

•

Balance cost of program with

value to the customer

Merchant Partners

2005

2006

2007

2008

Sales

Enrollments

CAGR = 42% Sales; 27% Enrollments

50

Rewards Leadership Recognized

Household Ownership of

Cash Rewards Cards

(1)

Satisfaction

Categories

Provides customers with

rewards that are

important to them

Makes it easy to earn

and redeem rewards

Allows customers to

accumulate more

rewards faster

Continually provides new

and different ways to

earn more rewards

Discover

Ranking

#1

#1

#1

#1

Source

2008 TNS Consumer Card Strategies Research Program

Source

GfK

Brand

Communications,

Brand

Tracker,

among

General

Population

respondents familiar with the brand (Discover statistically higher at 95% conf.

index); TNS 2008 Consumer Card Strategies Research Program

Note(s):

1.

Percentages add to >100% due to household use of multiple brands

44%

22%

16%

14%

7%

6%

Chase

Citi

AMEX

BofA

Capital

One

51

2005

2006

2007

2008

Customer Service is a Critical Differentiator

2008 J.D. Power Card

Satisfaction Index

(1)

High standards

•

U.S. based; customer service reps

have average tenure of 5 years

•

Rigorous performance standards

•

Critical revenue and customer

engagement tool

Supports growth

•

Fee product sales

•

Cross-sell success

•

High customer retention

Fee Product Sales

in Service Centers

+25%

Note(s):

1.

Chart excludes National City and Washington Mutual due to mergers

783

751

719

716

710

709

692

667

AMEX

Chase

U.S.

Bank

Citi

Wells

Fargo

BofA

HSBC

52

Online Experience Supports Brand Promise

•

Innovative capabilities increase

customer engagement and

usage

–

Spend Analyzer

–

Paydown Planner

–

Purchase Planner

–

Rewards enrollments

and redemptions

Purchase Planner:

“[This was] very easy to understand. I

am planning a big purchase and

using the tool helped me figure out

how much I could spend.”

Paydown Planner:

“It is about time that a credit card

company provide a tool to help pay

down a credit card and not just use

more credit.”

Spend Analyzer:

“This [Spend Analyzer] is

very helpful to me and

will make me choose this

over another credit card.”

53

Leveraging Merchant Relationships and

Acceptance to Drive Sales

Merchant-funded

offers to drive sales

Point-of-sale

marketing and

advertising promoting

acceptance

Promotional offers to

drive cardmember

activation and merchant

sales

54

Brand is Well Positioned

•

The key brand drivers are:

–

Rewards leadership

–

Customer experience

–

Online capabilities

–

Merchant relationships

and acceptance

•

The current environment

provides tremendous

opportunities to differentiate the

brand and deliver on the mission

•

Tools are in place to

measure and improve brand/

advertising effectiveness

Unaided Brand Awareness

Source

GfK Arbor, 3Q08 data

63%

60%

30%

26%

23%

17%

Amex

Capital

One

Chase

Citi

BofA

Payment Services

Diane Offereins

Executive Vice President,

Payment Services

January 29, 2009

56

Overview

•

Global payments

network targeting

upscale customers,

frequent travelers and

corporate clients

•

$31Bn volume

•

49 licensees

•

185 countries/

territories

•

Fast growing

PIN debit and

ATM network

•

$106Bn volume

•

4500+ issuers

•

Domestic acceptance

network for Discover

proprietary cards and

third-party issuers

•

$102Bn volume

•

30+ issuers

57

Highlights

Profit Before Tax (MM)

Payment Services –

Profit Before Tax

•

Launched third-party issuing

programs in 1Q05

•

Acquired PULSE in January

2005

•

Acquired Diners Club in

June 2008

$29

$37

$81

2006

2007

2008

58

Payment Services Priorities

Acceptance

•

Complete migration to new merchant acquiring model

•

Achieve interoperability of Discover and Diners Club networks

•

Extend global cash access for Diners Club and Discover through PULSE

•

Broaden Diners Club footprint

Drive Volume Growth

•

Leverage network to grow Discover Card

•

Expand existing issuer programs

•

Increase issuer base

•

Build non-traditional volume

59

Acceptance Model

Domestic

International

Global ATM

•

Direct relationships with the largest merchants

•

Third-party acquiring (sales, boarding and

support) for smaller merchants

•

Leverage efforts of Diners Club licensees

•

Network-to-network partnerships (CUP/JCB)

•

New relationships with third party acquirers

•

Partnerships and reciprocal agreements

60

Driving Discover Card Volume

Merchant Partnerships

Functionality and Flexibility

•

Cashback Bonus

®

Partner

program with 100+ merchants

•

5% Cashback Bonus

®

program

•

Customized programs

with merchants

•

Cash Over

61

•

Leverage existing relationships

•

Expand issuer base

•

Grow non-traditional volume

•

Capture U.S. inbound volume

for partner networks (CUP/JCB)

Customized Marketing Programs

Discover Network Third-Party Volume

Third-Party Issuing Volume (Bn)

$6.4

$5.5

2007

2008

Priorities

62

Diners Club International

North

America

23%

LATAM

12%

EMEA

38%

Asia

Pacific

27%

•

Execute on interoperability

•

Reinvigorate brand

•

Accelerate franchise

momentum

•

Improve acceptance in

key markets

Volume by Region

(1)

Priorities

Note(s):

1.

Includes all Diners Club branded volume

63

•

Extend and expand key

relationships

•

Superior value proposition

•

Additional PIN debit relationships

based on exclusivity

•

Enhance fee-based products

and services

•

Provide global cash access for

Diners Club/Discover

•

Invest in technology –

maintain

“best in class”

PULSE

1.9

2.3

2.7

2006

2007

2008

Number of Transactions (Bn)

Priorities

64

Summary

•

Well-established complementary networks

•

Innovative flexible solutions

•

Strong momentum

•

Great opportunity

David Nelms

Chairman &

Chief

Executive

Officer

January 29, 2009

Financial Community Briefing

66

Closing Thoughts

Manage conservatively in a challenging environment

•

Superior credit performance vs. competitors

•

Conservative loan growth

•

Increase net interest margin and revenues

•

Reduce expenses

•

Focus on capital/liquidity/funding

Build for the future

•

Embrace new Fed rules

•

Grow direct-to-consumer deposit business

•

Leverage Discover brand and leading Rewards program

•

Increase acceptance to drive higher sales

•

Grow and integrate Diners Club/PULSE/Discover networks

Q&A