Discover 2011 Annual Report Download - page 77
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65
For the Year Ended November 30, 2010 compared to the Year Ended November 30, 2009
Net interest income was $4.6 billion for the year ended November 30, 2010, a decline of 6% as compared to the year
ended November 30, 2009 on a non-GAAP as-adjusted basis. The decline in net interest income was primarily due to a lower
average level of credit card loan receivables as well as a decline in net interest margin.
Net interest margin was 9.14% for the year ended November 30, 2010, down 31 basis points as compared to the year
ended November 30, 2009 on a non-GAAP as-adjusted basis. This reflects a greater proportion of lower-rate student loans in
our loan portfolio for much of the year, lower rates earned on higher balances in our liquidity investment portfolio and higher
rates paid on long-term borrowings, partially offset by lower deposit funding costs and an improvement in credit card yield.
Yield on credit card loan receivables improved as a result of fewer promotional rate balances and higher interest rates earned on
standard balances, partially offset by the impact of legislative changes related to restrictions on increasing interest rates on
existing balances beginning in February 2010. Although the yield on credit card loan receivables was higher for the full year
2010 as compared to 2009 on a non-GAAP as-adjusted basis, the credit card yield during the fourth quarter 2010 was lower
than the fourth quarter 2009 on a non-GAAP as-adjusted basis.
The level of net interest income also declined during the year ended November 30, 2010, as compared to the year ended
November 30, 2009 on a non-GAAP as-adjusted basis, because of a decline in the average level of credit card loan receivables,
which was driven by a reduction in promotional rate balances and an increase in the payment rate. This was partially offset by
an increase in the level of student loans and a higher average level of liquidity.
Interest expense declined slightly for the year ended November 30, 2010 as compared to the year ended November 30,
2009 on a non-GAAP as-adjusted basis largely as a result of lower interest expense on securitized debt and deposits offset by
higher expense associated with subordinated debt issuances in late 2009 and April 2010. Interest expense on securitized debt
declined because of a significant level of maturities in the first half of 2010. Interest expense on deposits declined as the decline
in deposit interest rates more than offset the higher level of deposit borrowings, which replaced the maturing asset-backed
securities.
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