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10
Market฀Share฀for฀Receivables1฀and฀Total฀Transaction฀Volume2
(Calendar฀Basis)
9.0
7.5
6.0
4.5
3.0
1.5
0
Transaction฀Volume
Receivables
8.3%
1999
6.6%
8.8%
2000
7.0%
8.3%
2001
6.8%
8.0%
2002
6.6%
7.3%
2003
6.2%
Discover฀Financial฀Services
(Dollars฀in฀Millions)
฀ ฀ 2002฀ 2003฀ %฀CHANGE
REVENUES฀ 5,943฀ 5,500฀ –7%
EXPENSES฀(INCLUDING฀INTEREST฀AND฀
PROVISIONS฀FOR฀CONSUMER฀LOAN฀LOSSES)฀ 4,765฀ 4,407฀ –8%
PROFIT฀BEFORE฀TAXES฀ 1,178฀ 1,093฀ –7%
PROFIT฀BEFORE฀TAXES฀MARGIN฀ 20%฀ 20%฀ N/A
PRE-TAX฀RETURN฀ON฀
AVERAGE฀MANAGED฀RECEIVABLES฀ 2.36%฀ 2.15%฀ N/A
Sources:฀The฀Nilson฀Report฀and฀Company฀Reports
1฀ ฀Including฀American฀Express฀lending฀receivables฀only
2฀ ฀Excludes฀debit฀card฀volume
Net฀Principal฀Charge-off฀Rate฀and฀Delinquency฀Rate
(30+฀Days*)
6
5
4
3
2
1
0
Delinquency฀Rate
Net฀Principal฀Charge-off฀Rate
5.42%
1999
6.32%
4.40%
2000
5.92%
5.36%
2001
6.85%
6.19%
2002
5.96%
6.60%
2003
5.97%
Source:฀Company฀Filings
฀*฀Net฀principal฀charge-off฀rate฀and฀30+฀day฀delinquency฀rate฀reported฀on฀a฀managed฀loan฀basis.฀For฀a฀
reconciliation฀of฀credit฀card฀loan฀and฀asset฀quality฀data,฀see฀Morgan฀Stanley’s฀2003฀Annual฀Report฀on฀
Form฀10-K.
New฀Merchant฀Outlets฀
(In฀Thousands)
750
600
450
300
150
0
394
1998
615
1999
670
2000
726
2001
602
2002
628
2003
“As฀competitive฀pressures฀
have฀increased,฀we’ve฀been฀
working฀to฀reduce฀expenses,฀
improve฀our฀credit฀profile,฀
increase฀card฀usage฀and฀
acceptance,฀and฀create฀new฀
products฀in฀order฀to฀position฀
ourselves฀for฀growth.”
David฀Nelms฀
Chairman฀&฀Chief฀Executive฀Ofcer,฀
Discover฀Financial฀Services