Discover 2015 Annual Report Download - page 70
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Segments
We manage our business activities in two segments: Direct Banking and Payment Services. In compiling the
segment results that follow, our Direct Banking segment bears all corporate overhead costs that are not specifically
associated with a particular segment and all costs associated with Discover Network marketing, servicing and
infrastructure, with the exception of an allocation of direct and incremental costs driven by our Payment Services
segment.
Direct Banking
Our Direct Banking segment includes Discover-branded credit cards issued to individuals on the Discover
Network and other consumer products and services, including private student loans, personal loans, home equity loans,
and other consumer lending and deposit products. We announced the closure of our mortgage origination business in
June 2015 as described in Note 3: Business Dispositions to our consolidated financial statements. The majority of Direct
Banking revenues relate to interest income earned on the segment's loan products. Additionally, our credit card
products generate substantially all of our revenues related to discount and interchange, protection products and loan
fee income.
Payment Services
Our Payment Services segment includes PULSE, an automated teller machine, debit and electronic funds transfer
network; Diners Club, a global payments network; and our Network Partners business, which provides payment
transaction processing and settlement services on the Discover Network. The majority of Payment Services revenues
relate to transaction processing revenue from PULSE and royalty and licensee revenue (included in other income) from
Diners Club. Additionally until its sale on October 1, 2015, this segment included the business operations of Diners
Club Italy, which primarily consisted of activity related to issuing Diners Club charge cards in that country.
The following table presents segment data (dollars in millions):
For the Years Ended December 31,
2015 2014 2013
Direct Banking
Interest income
Credit card .................................................................................................................... $ 6,626 $ 6,359 $5,978
Private student loans ....................................................................................................... 378 312 252
PCI student loans ............................................................................................................ 220 260 272
Personal loans ............................................................................................................... 631 568 464
Other ............................................................................................................................ 90 97 98
Total interest income ................................................................................................... 7,945 7,596 7,064
Interest expense ................................................................................................................. 1,263 1,134 1,146
Net interest income ..................................................................................................... 6,682 6,462 5,918
Provision for loan losses ..................................................................................................... 1,512 1,440 1,069
Other income .................................................................................................................... 1,779 1,700 1,976
Other expense ................................................................................................................... 3,437 3,117 2,961
Income before income tax expense .............................................................................. 3,512 3,605 3,864
Payment Services
Provision for loan losses ..................................................................................................... — 3 17
Other income .................................................................................................................... 278 315 330
Other expense ................................................................................................................... 178 223 233
Income before income tax expense .............................................................................. 100 89 80
Total income before income tax expense .............................................................................. $ 3,612 $ 3,694 $3,944