Discover 2010 Annual Report Download - page 68

2010 Highlights
• Net income in 2010 was $765 million as compared to a reported net income of $1.3 billion in 2009 (which
included $1.2 billion of after tax income from the settlement of our antitrust litigation) and an as adjusted net loss of
$237 million in 2009.
• After peaking in the first quarter, net charge-offs declined throughout the remainder of 2010. Our over 30 day
delinquencies declined throughout 2010 after peaking in the fourth quarter of 2009. At November 30, 2010, the
twelve-month outlook for credit had improved in comparison to the outlook at the end of 2009 resulting in a decline
in the loan loss reserve rate, which led to a $598 million reduction of our allowance for loan losses in 2010.
• Discover card sales volume increased 6% in 2010 as compared to 2009, due to higher average spend per customer
and broadened merchant acceptance. However, credit card loan receivables at November 30, 2010 were down
5%, to $45.2 billion, from November 30, 2009 as adjusted due to a reduction in promotional rate balances and an
increase in the payment rate.
• Our revenues were unfavorably impacted in 2010 by the implementation of CARD Act provisions, which included
limitations on our ability to reprice accounts, the elimination of overlimit fees and a reduction in the amount of
standard late fees.
• We made significant investments to strengthen the Discover brand in 2010, reflected in a 14% increase in marketing
and business development expenses as compared to 2009.
• Transaction dollar volume in our Payment Services segment was $152 billion in 2010, an increase of 8% as
compared to 2009, and the number of transactions processed on our PULSE network increased 15% during the
same period. Pretax income for the segment was $141 million in 2010, an increase of 33% from 2009, reflecting
increased volumes from new and existing clients, higher margins from transactions processed on our PULSE network
and lower operating expenses.
• Direct-to-consumer deposits grew to $20.6 billion at November 30, 2010, an increase of $8 billion as compared to
November 30, 2009. This increase included the acquisition of approximately $1 billion of deposits in the second
quarter 2010.
• Our total equity at November 30, 2010 was $2.0 billion lower than it was at November 30, 2009, although our
regulatory capital ratios continued to remain strong. The reduction in equity reflects a $1.3 billion reduction related
to our adoption of FASB Statements No. 166 and 167 and a $1.4 billion reduction related to our redemption of our
preferred stock and a warrant to purchase shares of our common stock that we previously issued to the U.S.
Treasury under the Capital Purchase Program. These reductions were partially offset by the addition of $765 million
of net income.
2009 and 2008 Highlights
• In 2008, we settled our antitrust litigation with Visa and MasterCard for $2.75 billion. We received $862.5 million
from MasterCard ($535 million after tax) in the fourth quarter 2008 for its portion of the settlement. Throughout
2009, we received a total of $1.9 billion ($1.2 billion after tax) from Visa for its portion of the settlement. At the
time of our spin-off, we entered into an agreement with Morgan Stanley to determine how proceeds from the
litigation would be shared, among other things. In 2010, we paid Morgan Stanley a dividend of $775 million under
an amendment to that agreement. For additional details, see Note 21: Litigation to our consolidated financial
statements.
• We acquired Diners Club International (“Diners Club”) for $168 million in June 2008. Diners Club has network
licensees, which are generally financial institutions, that issue Diners Club branded credit cards and/or provide card
acceptance services in over 185 countries and territories.
• We sold our United Kingdom credit card business (Goldfish) in March 2008. This business represented substantially
all of our International Card segment, which is presented in discontinued operations in this report.
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