Discover 2010 Annual Report Download - page 5

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“In 2010, Discover made excellent
progress toward becoming
the leading direct banking and
payments company.”
David Nelms
Chairman and Chief Executive Offi cer
To Our Shareholders,
In many ways, 2010 was one of the best years in your company’s history. Discover achieved fi nancial results that were
exceptional given an environment that continued to be challenging in terms of economic conditions and regulatory
changes. In fact, in each quarter after the fi rst, we exceeded our targeted 15% return on equity. We also moved forward
on important initiatives in our Direct Banking and Payment Services segments. All in all, Discover is in excellent shape and
we are well positioned for the future with a strong balance sheet, a growing line-up of products and services, and a unique
business model.
As indicated on the cover, 2011 is the 25th year in business for Discover. In 1986, Discover launched a new credit card
and a new payment network built around cash rewards, innovation and great customer service. Our focus on the customer
has served us well over the years through economic cycles, and 25 years later, we are still providing our customers with
outstanding rewards, service and value. At the same time, we have grown volume on our payment networks to nearly
$250 billion, providing our business partners around the world with a viable option to other payment networks. Looking
ahead, we will build on the success of the past and focus on becoming the leading direct banking and payments company.
2010 Financial Results
Discover emerged from the recession in better fi nancial condition than many of our competitors. Our fi nancial highlights
in 2010 included:
• Diluted earnings per share of $1.22.
• Record Discover card sales volume of $92.5 billion, up 6% from the prior year.
• Stable credit card loans of $45.2 billion, which translated into a market share gain as U.S. consumers deleveraged.
• A full-year net charge-off rate of 7.6%, with steady improvement throughout the year, ending at 6.6% in the fourth
quarter of 2010.
• $248 billion in volume on our Discover, PULSE and Diners Club International networks, up 7% from the prior year.
• A 33% increase in pre-tax profi t from our Payment Services segment.
• A decrease in operating expenses for the third consecutive year.