Discover 2009 Annual Report Download - page 69

The following table presents information on transaction volume (amounts in thousands):
For the Years Ended November 30,
2009 2008 2007
Network Transaction Volume
PULSE Network.............................................................................................................................. $109,302,121 $106,012,108 $ 86,236,408
Third-Party Issuers.......................................................................................................................... 5,671,555 6,398,579 5,480,105
Diners Club(1) ................................................................................................................................ 26,172,977 12,685,690 —
Total Payment Services ................................................................................................................ 141,146,653 125,096,377 91,716,513
Discover Network – Proprietary(2) ..................................................................................................... 90,688,997 95,688,443 93,794,500
Total Volume.............................................................................................................................. $231,835,650 $220,784,820 $185,511,013
Transactions Processed on Networks
Discover Network .......................................................................................................................... 1,513,955 1,515,368 1,486,366
PULSE Network.............................................................................................................................. 2,878,720 2,682,312 2,285,061
Total...................................................................................................................................... 4,392,675 4,197,680 3,771,427
Credit Card Volume
Discover Card Volume(3).................................................................................................................. $ 95,592,170 $105,734,055 $106,620,818
Discover Card Sales Volume(4) ......................................................................................................... $ 87,460,552 $ 92,239,779 $ 90,262,556
(1) Diners Club was acquired on June 30, 2008. Diners Club volume is derived from data provided by licensees for Diners Club branded cards issued outside North America and is subject to
subsequent revision or amendment.
(2) Represents gross proprietary sales volume on the Discover Network.
(3) Represents Discover card activity related to net sales, balance transfers, cash advances and fee-based products.
(4) Represents Discover card activity related to net sales.
The segment discussions that follow for the years ended November 30, 2009, 2008 and 2007 are on a managed
basis.
Direct Banking
Our Direct Banking segment, formerly referred to as our U.S. Card segment, reported pretax income of $2.0 billion for
the year ended November 30, 2009, up 28% from the year ended November 30, 2008. The increase was driven
principally by income related to the Visa and MasterCard antitrust litigation settlement, higher net interest income and
lower operating expenses, partially offset by higher provision for loan losses. Net interest income increased $625.9
million, or 15%, due to the impact of higher interest rates on standard balances, a substantial reduction in promotional
rate balances and lower interest rates on borrowings, partially offset by higher interest charge-offs. Provision for loan
losses increased $1.3 billion, or 42%, as a result of higher charge-offs and a higher reserve rate, reflective of the current
economic environment. Other income increased $0.9 billion mainly due to revenue related to the Visa and MasterCard
antitrust litigation settlement. Other expense decreased $198.0 million, or 9%, reflecting the impact of cost containment
initiatives such as a reduction of headcount, lower marketing and lower litigation expenses. The 2008 other expenses
included a $38.9 million benefit due to curtailment of the company’s pension plan.
Managed loans of $50.9 billion at November 30, 2009 were relatively unchanged from November 30, 2008 as lower
payments from our credit card customers and growth in both student and personal loans were largely offset by lower
balance transfer activity and sales volume. Rising unemployment and bankruptcy levels adversely impacted customer
delinquencies and charge-offs, resulting in a 5.31% managed over 30 days delinquency rate for the segment, including
non-credit card loans, up from 4.56% at November 30, 2008. For the year ended November 30, 2009, the managed
segment and credit card net charge-off rates were 7.77% and 8.00%, respectively, up 276 basis points and 293 basis
points, respectively, from the year ended November 30, 2008.
Our Direct Banking segment reported pretax income of $1.6 billion for the year ended November 30, 2008, up $87.4
million, or 6%, as compared to November 30, 2007. The increase in pretax income was driven principally by payment
from MasterCard for its portion of the Visa and MasterCard antitrust litigation settlement and by higher net interest
income, partially offset by higher provision for loan losses. Net interest income increased $550.6 million, or 15%, as
higher average loan receivables and the accretion of balance transfer fees, previously recorded in loan fee income,
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