DISCOVER FINANCIAL SERVICES (Exact name of registrant as specified in its charter)

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C Form 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 24, 2018 DISCOVER FINANCIAL SERVICES (Exact name of registrant as specified in its charter) Commission File Number: Delaware (State or other jurisdiction of incorporation) 2500 Lake Cook Road, Riverwoods, Illinois (Address of principal executive offices, including zip code) (224) (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) (IRS Employer Identification No.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: o Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 ( of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 ( b-2 of this chapter). o Emerging growth company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

2 Item Results of Operations and Financial Condition. On January 24, 2018, Discover Financial Services (the Company ) released financial information with respect to the quarter ended December 31, Copies of the press release, financial data supplement and financial results presentation containing this information are attached hereto as exhibits and incorporated herein by reference. The quotation immediately preceding the caption Segment Results included in Exhibit 99.1 (the Excluded Quote ) and Exhibit 99.3 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act ), or otherwise subject to the liabilities of that section nor shall it be deemed to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act. The information included in Exhibit 99.1, other than in the Excluded Quote, and Exhibit 99.2 shall be deemed filed for purposes of the Exchange Act.

3 Item Financial Statements and Exhibits. (d) Exhibits Exhibit No. Description 99.1 Press Release of the Company dated January 24, 2018 containing financial information for the quarter ended December 31, Financial Data Supplement of the Company for the quarter and year ended December 31, Financial Results Presentation of the Company for the quarter and year ended December 31, 2017

4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DISCOVER FINANCIAL SERVICES Dated: January 24, 2018 By: /s/ D. Christopher Greene Name: D. Christopher Greene Title: Vice President, Deputy General Counsel and Assistant Secretary

5 EXHIBIT INDEX Exhibit No. Description Press Release of the Company dated January 24, 2018 containing financial information for the quarter ended December , Financial Data Supplement of the Company for the quarter and year ended December 31, Financial Results Presentation of the Company for the quarter and year ended December 31, 2017

6 Exhibit 99.1 DISCOVER FINANCIAL SERVICES REPORTS FOURTH QUARTER NET INCOME OF $387 MILLION OR $0.99 PER DILUTED SHARE NET INCOME INCLUDED ONE-TIME CHARGES OF $189 MILLION RESULTING FROM ACTIONS TAKEN BY THE COMPANY IN CONNECTION WITH THE TAX CUTS AND JOBS ACT Riverwoods, IL, January 24, Discover Financial Services (NYSE: DFS) today reported net income of $387 million or $0.99 per diluted share for the fourth quarter of 2017, as compared to $563 million or $1.40 per diluted share for the fourth quarter of The company s return on equity for the fourth quarter of 2017 was 14%. Net income included non-recurring charges of $189 million resulting from actions taken by the company in connection with the Tax Cuts and Jobs Act ("Tax Act"). These charges had the effect of reducing diluted earnings per share by $0.52. Fourth Quarter Highlights Total loans grew $7.0 billion ( 9% ) from the prior year to $84.2 billion. Credit card loans grew $5.8 billion ( 9% ) to $67.3 billion, on Discover card sales volume of $35.3 billion. Total net charge-off rate excluding PCI loans increased 53 basis points from the prior year to 2.92% and the total 30+ day delinquency rate excluding PCI loans increased 23 basis points from the prior year to 2.20%. Consumer deposits grew $3.4 billion ( 9% ) from the prior year to $39.4 billion. Payment Services transaction dollar volume was $54.0 billion, up 17% from the prior year. Income tax expense includes a one-time adjustment of $179 million to reflect the impact of the Tax Act. Our earnings in the fourth quarter and full year were driven by strong loan and revenue growth across our businesses, the result of continued execution of our strategy, said David Nelms, chairman and CEO of Discover. As we move forward in 2018, this strong momentum, enhanced by the favorable economic environment, should position us well for sustained growth, strong ROE and continued return of excess capital to shareholders. While the new tax law impacted the current quarter, I am excited about the opportunity it provides to further invest in growth, our people and our communities." Segment Results: Direct Banking Direct Banking pretax income of $870 million in the quarter rose by $2 million from the prior year as increased revenue was largely offset by higher provision for loan losses and operating expenses. Total loans ended the quarter at $ 84.2 billion, up 9% compared to the prior year. Credit card loans ended the quarter at $67.3 billion, up 9% from the prior year. Personal loans increased $893 million ( 14% ) from the prior year. Private student loans increased $183 million ( 2% ) year-over-year, and grew $683 million ( 11% ) excluding purchased student loans. Net interest income increased $228 million ( 12% ) from the prior year, driven by loan growth and a higher net interest margin. Net interest margin was 10.28%, up 21 basis points from the prior year. Card yield was 12.79%, an increase of 17 basis points from the prior year because of increases in the prime rate, partially offset by higher interest charge-offs and a change in portfolio mix. Interest expense as a percent of total loans increased 16 basis points from the prior year, as higher market rates were partially offset by tighter credit spreads on refinanced long-term debt. Other income increased $22 million ( 5% ) from the prior year, driven by higher discount and interchange revenue. The delinquency rate for credit card loans over 30 days past due was 2.28%, up 24 basis points from the prior year and 14 basis points from the prior quarter. The credit card net charge-off rate for the fourth quarter was 3.03%, up 56 basis points from the prior year and 23 basis points from the prior quarter. The student loan net charge-off rate excluding purchased credit-impaired ("PCI") loans was 1.34%, down 8 basis points from the prior year. The personal loans net charge-off rate of 3.62% increased by

7 92 basis points from the prior year. Net charge-off rates were generally higher because of supply-driven credit normalization and the seasoning of loan growth from the last few years. Provision for loan losses of $678 million increased $99 million from the prior year due to higher net charge-offs, partially offset by a smaller reserve build. The reserve build for the fourth quarter of 2017 was $94 million, compared to a reserve build of $144 million in the fourth quarter of Expenses increased $149 million from the prior year as a result of higher employee compensation, marketing and professional fees. Employee compensation increased as a result of higher staffing levels and higher average salaries. In addition, employee compensation includes a $16 million charge associated with a one-time bonus granted to eligible employees following passage of the new tax legislation. Marketing expenses increased as a result of higher acquisition costs and brand advertising relative to the fourth quarter of The increase in professional fees is primarily due to investments in technology and analytic capabilities. Payment Services Payment Services pretax income was $29 million in the quarter, up $14 million from the prior year, primarily driven by lower operating expenses as well as higher transaction processing and interchange revenue. Payment Services transaction dollar volume was $54.0 billion, up 17% versus the prior year. PULSE transaction dollar volume was up 19% year-over-year. Diners Club volume increased 14% year-over-year driven by continued strength of newer franchise relationships. Share Repurchases During the fourth quarter of 2017, the company repurchased approximately 8.1 million shares of common stock for $555 million. Shares of common stock outstanding declined by 2.2% from the prior quarter. Conference Call and Webcast Information The company will host a conference call to discuss its fourth quarter results on Wednesday, January 24, 2018, at 4:00 p.m. Central time. Interested parties can listen to the conference call via a live audio webcast at About Discover Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover card, America's cash rewards pioneer, and offers private student loans, personal loans, home equity loans, checking and savings accounts and certificates of deposit through its direct banking business. It operates the Discover Network, with millions of retail and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance in more than 185 countries and territories. For more information, visit Contacts: Investors: Craig Streem, craigstreem@discover.com Media: Jon Drummond, jondrummond@discover.com

8 A financial summary follows. Financial, statistical, and business related information, as well as information regarding business and segment trends, is included in the financial supplement filed as Exhibit 99.2 to the company's Current Report on Form 8-K filed today with the Securities and Exchange Commission ( SEC ). Both the earnings release and the financial supplement are available online at the SEC's website ( and the company's website ( This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such statements, which speak to our expected business and financial performance, among other matters, contain words such as believe, expect, anticipate, intend, plan, aim, will, may, should, could, would, likely, and similar expressions. Such statements are based upon the current beliefs and expectations of the company's management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this press release, and there is no undertaking to update or revise them as more information becomes available. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment, the levels of consumer confidence and consumer debt, and investor sentiment; the impact of current, pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions, including, but not limited to, those related to tax reform, financial regulatory reform, consumer financial services practices, anti-corruption, and funding, capital and liquidity; the actions and initiatives of current and potential competitors; the company's ability to manage its expenses; the company's ability to successfully achieve card acceptance across its networks and maintain relationships with network participants; the company's ability to sustain and grow its non-card products; difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; the company's ability to manage its credit risk, market risk, liquidity risk, operational risk, compliance and legal risk, and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit markets; the impact of rating agency actions; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; losses in the company's investment portfolio; limits on the company's ability to pay dividends and repurchase its common stock; limits on the company's ability to receive payments from its subsidiaries; fraudulent activities or material security breaches of key systems; the company's ability to remain organizationally effective; the company's ability to increase or sustain Discover card usage or attract new customers; the company's ability to maintain relationships with merchants; the effect of political, economic and market conditions, geopolitical events and unforeseen or catastrophic events; the company's ability to introduce new products or services; the company's ability to manage its relationships with third-party vendors; the company's ability to maintain current technology and integrate new and acquired systems; the company's ability to collect amounts for disputed transactions from merchants and merchant acquirers; the company's ability to attract and retain employees; the company's ability to protect its reputation and its intellectual property; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. The company routinely evaluates and may pursue acquisitions of or investments in businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or the company's debt or equity securities. Additional factors that could cause the company's results to differ materially from those described in the forward-looking statements can be found under Risk Factors, Business - Competition, Business - Supervision and Regulation and Management's Discussion and Analysis of Financial Condition and Results of Operations in the company's Annual Report on Form 10-K for the year ended December 31, 2016, and "Management's Discussion & Analysis of Financial Condition and Results of Operations" in the company's Quarterly Report on Form 10-Q for the quarters ended September 30, 2017, June 30, 2017, and March 31, 2017, which are filed with the SEC and available at the SEC's internet site (

9 DISCOVER FINANCIAL SERVICES Exhibit 99.2 EARNINGS SUMMARY (unaudited, in millions, except per share statistics) EARNINGS SUMMARY Quarter Ended Twelve Months Ended Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Dec 31, 2017 vs. Dec 31, 2016 Dec 31, 2017 Dec 31, vs Interest Income $2,556 $2,476 $2,338 $2,278 $2,258 $298 13% $9,648 $8,616 $1,032 12% Interest Expense % 1,648 1, % Net Interest Income 2,120 2,050 1,938 1,892 1, % 8,000 7, % Discount/Interchange Revenue % 2,654 2, % Rewards Cost % 1,602 1, % Discount and Interchange Revenue, net % 1,052 1,055 (3) % Protection Products Revenue (5) (8%) (16) (7%) Loan Fee Income % % Transaction Processing Revenue % % Other Income (2) (10%) % Total Other Income % 1,897 1, % Revenue Net of Interest Expense 2,614 2,525 2,419 2,339 2, % 9,897 9, % Provision for Loan Losses % 2,579 1, % Employee Compensation and Benefits % 1,512 1, % Marketing and Business Development % % Information Processing & Communications (1) (1%) (24) (7%) Professional Fees % % Premises and Equipment % % Other Expense % (11) (3%) Total Other Expense 1, % 3,781 3, % Income Before Income Taxes % 3,537 3,656 (119) (3%) Tax Expense % 1,438 1, % Net Income $387 $602 $546 $564 $563 ($176) (31%) $2,099 $2,393 ($294) (12%) Net Income Allocated to Common Stockholders $359 $589 $532 $551 $550 ($191) (35%) $2,031 $2,339 ($308) (13%) Effective Tax Rate 57.0% 33.3% 37.1% 35.0% 36.3% 40.7% 34.5% Net Interest Margin 10.28% 10.28% 10.11% 10.07% 10.07% 21 bps 10.19% 9.99% 20 bps Operating Efficiency 39.7% 37.5% 37.7% 37.9% 38.0% 170 bps 38.2% 39.4% (120) bps ROE 14% 22% 19% 20% 20% 19% 21% Capital Returned to Common Stockholders $657 $667 $547 $620 $581 $76 13% $2,491 $2,306 $185 8% Payout Ratio 183% 113% 103% 113% 106% 123% 99% 2,400 bps Ending Common Shares Outstanding (31) (8%) (31) (8%) Weighted Average Common Shares Outstanding (30) (8%) (31) (8%) Weighted Average Common Shares Outstanding (fully diluted) (31) (8%) (32) (8%) PER SHARE STATISTICS Basic EPS $0.99 $1.59 $1.41 $1.43 $1.40 ($0.41) (29%) $5.43 $5.77 ($0.34) (6%) Diluted EPS $0.99 $1.59 $1.40 $1.43 $1.40 ($0.41) (29%) $5.42 $5.77 ($0.35) (6%) Common Stock Price (period end) $76.92 $64.48 $62.19 $68.39 $72.09 $4.83 7% $76.92 $72.09 $4.83 7% Book Value per share $30.43 $30.56 $30.01 $29.46 $29.13 $1.30 4% $30.43 $29.13 $1.30 4% Note: See Glossary of Financial Terms for definitions of financial terms

10 DISCOVER FINANCIAL SERVICES EARNINGS SUMMARY (unaudited, in millions) Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Quarter Ended Twelve Months Ended Mar 31, 2017 Dec 31, 2016 Dec 31, 2017 vs. Dec 31, 2016 Dec 31, 2017 Dec 31, vs SEGMENT- INCOME BEFORE INCOME TAXES Direct Banking $870 $867 $831 $824 $868 $2 % $3,392 $3,549 ($157) (4%) Payment Services % % Total $899 $903 $867 $868 $883 $16 2% $3,537 $3,656 ($119) (3%) TRANSACTIONS PROCESSED ON NETWORKS Discover Network % 2,240 2, % PULSE Network 1, % 3,856 3, % Total 1,636 1,575 1,512 1,373 1, % 6,096 5, % NETWORK VOLUME PULSE Network $42,386 $39,828 $38,848 $36,066 $35,554 $6,832 19% $157,128 $138,003 $19,125 14% Network Partners 3,280 3,811 3,461 3,661 3, % 14,213 13, % Diners Club International 1 8,373 7,989 7,800 7,382 7,334 1,039 14% 31,544 28,601 2,943 10% Total Payment Services 54,039 51,628 50,109 47,109 46,123 7,916 17% 202, ,437 22,448 12% Discover Network - Proprietary 36,267 33,576 33,342 29,859 34,029 2,238 7% 133, ,144 6,900 5% Total $90,306 $85,204 $83,451 $76,968 $80,152 $10,154 13% $335,929 $306,581 $29,348 10% 1 Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment Note: See Glossary of Financial Terms for definitions of financial terms

11 DISCOVER FINANCIAL SERVICES BALANCE SHEET SUMMARY (unaudited, in millions) Quarter Ended Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Dec 31, 2017 vs. Dec 31, 2016 BALANCE SHEET SUMMARY Assets Cash and Investment Securities $14,955 $16,155 $14,722 $17,981 $13,766 $1,189 9% Total Loan Receivables 84,248 80,443 77,997 75,853 77,254 6,994 9% Allowance for Loan Losses (2,621) (2,531) (2,384) (2,264) (2,167) (454) (21%) Net Loan Receivables 81,627 77,912 75,613 73,589 75,087 6,540 9% Premises and Equipment, net % Goodwill and Intangible Assets, net (3) (1%) Other Assets 2,262 2,323 2,229 2,055 2,300 (38) (2%) Total Assets $100,087 $97,608 $93,757 $94,795 $92,308 $7,779 8% Liabilities & Stockholders' Equity Direct to Consumer and Affinity Deposits $39,367 $38,703 $37,709 $37,094 $36,002 $3,365 9% Brokered Deposits and Other Deposits 19,397 17,432 15,155 16,428 15,990 3,407 21% Deposits 58,764 56,135 52,864 53,522 51,992 6,772 13% Borrowings 26,326 26,737 26,438 26,823 25, % Accrued Expenses and Other Liabilities 4,105 3,549 3,196 3,185 3, % Total Liabilities 89,195 86,421 82,498 83,530 80,985 8,210 10% Total Equity 10,892 11,187 11,259 11,265 11,323 (431) (4%) Total Liabilities and Stockholders' Equity $100,087 $97,608 $93,757 $94,795 $92,308 $7,779 8% LIQUIDITY Liquidity Portfolio $13,560 $13,906 $13,865 $16,213 $12, % Undrawn Credit Facilities 1 35,153 33,696 31,877 30,823 30,194 4,959 16% Total Liquidity $48,713 $47,602 $45,742 $47,036 $42,829 $5,884 14% 1 Excludes investments pledged to the Federal Reserve, which is included within the liquidity portfolio Note: See Glossary of Financial Terms for definitions of financial terms

12 DISCOVER FINANCIAL SERVICES BALANCE SHEET STATISTICS (unaudited, in millions) Quarter Ended Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Dec 31, 2017 vs. Dec 31, 2016 BALANCE SHEET STATISTICS Total Common Equity $10,329 $10,627 $10,699 $10,705 $10,763 ($434) (4%) Total Common Equity/Total Assets 10.3% 10.9% 11.4% 11.3% 11.7% Total Common Equity/Net Loans 12.7% 13.6% 14.2% 14.5% 14.3% Tangible Assets $99,669 $97,190 $93,338 $94,375 $91,887 $7,782 8% Tangible Common Equity 1 $9,911 $10,209 $10,280 $10,285 $10,342 ($431) (4%) Tangible Common Equity/Tangible Assets 1 9.9% 10.5% 11.0% 10.9% 11.3% Tangible Common Equity/Net Loans % 13.1% 13.6% 14.0% 13.8% Tangible Common Equity per share 1 $27.69 $27.89 $27.40 $26.90 $26.60 $1.09 4% REGULATORY CAPITAL RATIOS Basel III Transition Total Risk Based Capital Ratio 13.8% 14.7% 15.2% 15.7% 15.5% Tier 1 Risk Based Capital Ratio 12.3% 13.2% 13.7% 14.1% 13.9% Tier 1 Leverage Ratio 10.8% 11.4% 11.8% 11.8% 12.3% Common Equity Tier 1 Capital Ratio 11.6% 12.5% 13.0% 13.4% 13.2% Basel III Fully Phased-in Common Equity Tier 1 Capital Ratio % 12.5% 13.0% 13.4% 13.2% RATIO OF EARNINGS TO FIXED CHARGES Ratio of Earnings to Fixed Charges 3, Tangible Common Equity ("TCE") is a non-gaap measure. The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure see Reconciliation of GAAP to non-gaap data schedule 2 Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) is calculated using Basel III Fully Phased-in Common Equity Tier 1 Capital, a non-gaap measure. The Company believes that the Common Equity Tier 1 Capital Ratio based on Fully Phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of Common Equity Tier 1 Capital and Risk Weighted Assets calculated under Fully Phased-in Basel III rules to Common Equity Tier 1 Capital and Risk Weighted Assets calculated under Basel III transition rules see the Reconciliation of GAAP to non-gaap data schedule 3 Fixed charges are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and an estimate of interest within rental expense 4 The Ratio of Earnings to Fixed Charges is a year-to-date statistic. The periods reported reflect the twelve months ended December 31, 2017, the nine months ended September 30, 2017, the six months ended June 30, 2017, the three months ended March 31, 2017, and the twelve months ended December 31, 2016 Note: See Glossary of Financial Terms for definitions of financial terms.

13 DISCOVER FINANCIAL SERVICES AVERAGE BALANCE SHEET (unaudited, in millions) Quarter Ended Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Dec 31, 2017 vs. Dec 31, 2016 AVERAGE BALANCES Assets Cash and Investment Securities $15,290 $14,547 $14,616 $15,424 $13,567 $1,723 13% Restricted Cash (197) (42%) Credit Card Loans 64,791 62,647 60,700 60,122 59,121 5,670 10% Private Student Loans 9,158 8,986 9,020 9,197 8, % Personal Loans 7,455 7,208 6,820 6,582 6,425 1,030 16% Other Loans % Total Loans 81,802 79,189 76,854 76,185 74,775 7,027 9% Total Interest Earning Assets 97,368 94,584 92,029 92,428 88,815 8,553 10% Allowance for Loan Losses (2,530) (2,379) (2,262) (2,166) (2,021) (509) (25%) Other Assets 4,252 4,192 4,147 4,166 4, % Total Assets $99,090 $96,397 $93,914 $94,428 $90,956 $8,134 9% Liabilities and Stockholders' Equity Direct to Consumer and Affinity Deposits $38,807 $37,900 $36,956 $36,316 $35,396 $3,411 10% Brokered Deposits and Other Deposits 18,244 16,192 15,600 16,242 14,355 3,889 27% Total Interest-bearing Deposits 57,051 54,092 52,556 52,558 49,751 7,300 15% Short-term Borrowings % Securitized Borrowings 16,676 17,206 16,141 16,960 16,817 (141) (1%) Other Long-term Borrowings 9,768 9,721 9,979 9,600 9, % Total Interest-bearing Liabilities 83,497 81,020 78,678 79,119 75,611 7,886 10% Other Liabilities & Stockholders' Equity 15,593 15,377 15,236 15,309 15, % Total Liabilities and Stockholders' Equity $99,090 $96,397 $93,914 $94,428 $90,956 $8,134 9% AVERAGE RATES Assets Cash and Investment Securities 1.34% 1.31% 1.12% 0.90% 0.72% 62 bps Restricted Cash 1.34% 1.15% 0.89% 0.70% 0.37% 97 bps Credit Card Loans 12.79% 12.83% 12.66% 12.65% 12.62% 17 bps Private Student Loans 7.69% 7.56% 7.45% 7.29% 7.06% 63 bps Personal Loans 12.27% 12.33% 12.22% 12.18% 12.09% 18 bps Other Loans 5.66% 5.56% 5.59% 5.39% 4.88% 78 bps Total Loans 12.14% 12.15% 11.98% 11.94% 11.88% 26 bps Total Interest Earning Assets 10.41% 10.39% 10.19% 9.99% 10.12% 29 bps Liabilities and Stockholders' Equity Direct to Consumer and Affinity Deposits 1.44% 1.37% 1.29% 1.25% 1.26% 18 bps Brokered Deposits and Other Deposits 2.12% 2.12% 2.07% 1.98% 1.93% 19 bps Total Interest-bearing Deposits 1.65% 1.59% 1.52% 1.48% 1.45% 20 bps Short-term Borrowings 1.31% 1.33% 1.06% 0.67% 0.60% 71 bps Securitized Borrowings 2.19% 2.37% 2.31% 2.17% 2.09% 10 bps Other Long-term Borrowings 4.30% 4.30% 4.36% 4.38% 4.26% 4 bps Total Interest-bearing Liabilities 2.07% 2.08% 2.04% 1.98% 1.93% 14 bps Net Interest Margin 10.28% 10.28% 10.11% 10.07% 10.07% 21 bps Net Yield on Interest-earning Assets 8.64% 8.60% 8.44% 8.30% 8.47% 17 bps Note: See Glossary of Financial Terms for definitions of financial terms

14 DISCOVER FINANCIAL SERVICES LOAN STATISTICS (unaudited, in millions) Quarter Ended Twelve Months Ended Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Dec 31, 2017 vs. Dec 31, 2016 Dec 31, 2017 Dec 31, vs TOTAL LOAN RECEIVABLES Ending Loans 1, 2 $84,248 $80,443 $77,997 $75,853 $77,254 $6,994 9% $84,248 $77,254 $6,994 9% Average Loans 1, 2 $81,802 $79,189 $76,854 $76,185 $74,775 $7,027 9% $78,525 $72,280 $6,245 9% Interest Yield 12.14% 12.15% 11.98% 11.94% 11.88% 26 bps 12.06% 11.78% 28 bps Gross Principal Charge-off Rate 3.45% 3.26% 3.36% 3.25% 2.91% 54 bps 3.33% 2.81% 52 bps Gross Principal Charge-off Rate excluding PCI Loans % 3.35% 3.47% 3.37% 3.02% 52 bps 3.43% 2.93% 50 bps Net Principal Charge-off Rate 2.85% 2.63% 2.71% 2.60% 2.31% 54 bps 2.70% 2.16% 54 bps Net Principal Charge-off Rate excluding PCI Loans % 2.71% 2.79% 2.69% 2.39% 53 bps 2.78% 2.24% 54 bps Delinquency Rate (over 30 days) excluding PCI Loans % 2.05% 1.93% 1.97% 1.97% 23 bps 2.20% 1.97% 23 bps Delinquency Rate (over 90 days) excluding PCI Loans % 0.91% 0.88% 0.92% 0.87% 12 bps 0.99% 0.87% 12 bps Gross Principal Charge-off Dollars $711 $651 $645 $611 $548 $163 30% $2,618 $2,034 $584 29% Net Principal Charge-off Dollars $583 $527 $520 $489 $435 $148 34% $2,119 $1,561 $558 36% Net Interest and Fee Charge-off Dollars $119 $107 $110 $106 $94 $25 27% $442 $344 $98 28% Loans Delinquent Over 30 Days 3 $1,806 $1,605 $1,457 $1,445 $1,469 $337 23% $1,806 $1,469 $337 23% Loans Delinquent Over 90 Days 3 $815 $709 $667 $675 $652 $163 25% $815 $652 $163 25% Allowance for Loan Loss (period end) $2,621 $2,531 $2,384 $2,264 $2,167 $454 21% $2,621 $2,167 $454 21% Reserve Change Build/ (Release) 4 $96 $147 $120 $97 $143 ($47) $460 $298 $162 Reserve Rate 3.11% 3.15% 3.06% 2.98% 2.80% 31 bps 3.11% 2.80% 31 bps Reserve Rate Excluding PCI Loans % 3.20% 3.11% 3.04% 2.86% 29 bps 3.15% 2.86% 29 bps CREDIT CARD LOANS Ending Loans $67,291 $63,475 $61,797 $59,757 $61,522 $5,769 9% $67,291 $61,522 $5,769 9% Average Loans $64,791 $62,647 $60,700 $60,122 $59,121 $5,670 10% $62,079 $57,238 $4,841 8% Interest Yield 12.79% 12.83% 12.66% 12.65% 12.62% 17 bps 12.74% 12.50% 24 bps Gross Principal Charge-off Rate 3.73% 3.53% 3.71% 3.61% 3.19% 54 bps 3.65% 3.12% 53 bps Net Principal Charge-off Rate 3.03% 2.80% 2.94% 2.84% 2.47% 56 bps 2.91% 2.34% 57 bps Delinquency Rate (over 30 days) 2.28% 2.14% 2.00% 2.06% 2.04% 24 bps 2.28% 2.04% 24 bps Delinquency Rate (over 90 days) 1.12% 1.02% 0.98% 1.03% 0.97% 15 bps 1.12% 0.97% 15 bps Gross Principal Charge-off Dollars $612 $555 $561 $535 $474 $138 29% $2,263 $1,786 $477 27% Net Principal Charge-off Dollars $496 $439 $445 $422 $369 $127 34% $1,802 $1,343 $459 34% Loans Delinquent Over 30 Days $1,532 $1,359 $1,237 $1,233 $1,252 $280 22% $1,532 $1,252 $280 22% Loans Delinquent Over 90 Days $751 $646 $603 $616 $597 $154 26% $751 $597 $154 26% Allowance for Loan Loss (period end) $2,147 $2,091 $1,980 $1,892 $1,790 $357 20% $2,147 $1,790 $357 20% Reserve Change Build/ (Release) $56 $111 $88 $102 $129 ($73) $357 $236 $121 Reserve Rate 3.19% 3.29% 3.21% 3.17% 2.91% 28 bps 3.19% 2.91% 28 bps Total Discover Card Volume $38,574 $35,581 $35,297 $32,406 $35,440 $3,134 9% $141,858 $132,324 $9,534 7% Discover Card Sales Volume $35,339 $32,161 $32,172 $29,134 $32,486 $2,853 9% $128,806 $121,423 $7,383 6% Rewards Rate 1.23% 1.30% 1.20% 1.25% 1.26% (3) bps 1.24% 1.19% 5 bps 1 Total Loans includes Home Equity and other loans 2 Purchased Credit Impaired ("PCI") loans are loans that were acquired in which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables 3 Excludes PCI loans (described above) which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the Company is recognizing interest income on a pool of loans, it is all considered to be performing 4 Allowance for loan loss includes the net change in reserves on PCI pools having no remaining non-accretable difference which does not impact the reserve change build/(release) in provision for loan losses Note: See Glossary of Financial Terms for definitions of financial terms

15 DISCOVER FINANCIAL SERVICES LOAN STATISTICS (unaudited, in millions) Quarter Ended Twelve Months Ended Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Dec 31, 2017 vs. Dec 31, 2016 Dec 31, 2017 Dec 31, vs PRIVATE STUDENT LOANS Ending Loans $9,160 $9,200 $8,916 $9,138 $8,977 $183 2% $9,160 $8,977 $183 2% Ending PCI Loans 1 $2,084 $2,202 $2,322 $2,449 $2,584 ($500) (19%) $2,084 $2,584 ($500) (19%) Interest Yield 7.69% 7.56% 7.45% 7.29% 7.06% 63 bps 7.50% 7.09% 41 bps Net Principal Charge-off Rate 1.03% 1.14% 0.85% 0.60% 1.00% 3 bps 0.90% 0.75% 15 bps Net Principal Charge-off Rate excluding PCI Loans % 1.52% 1.15% 0.83% 1.42% (8) bps 1.21% 1.10% 11 bps Delinquency Rate (over 30 days) excluding PCI Loans % 2.14% 2.12% 2.04% 2.22% 13 bps 2.35% 2.22% 13 bps Reserve Rate 1.77% 1.77% 1.78% 1.70% 1.74% 3 bps 1.77% 1.74% 3 bps Reserve Rate excluding PCI Loans % 1.89% 1.91% 1.80% 1.91% (2) bps 1.89% 1.91% (2) bps PERSONAL LOANS Ending Loans $7,374 $7,397 $6,955 $6,663 $6,481 $893 14% $7,374 $6,481 $893 14% Interest Yield 12.27% 12.33% 12.22% 12.18% 12.09% 18 bps 12.25% 12.19% 6 bps Net Principal Charge-off Rate 3.62% 3.19% 3.18% 3.16% 2.70% 92 bps 3.30% 2.55% 75 bps Delinquency Rate (over 30 days) 1.40% 1.27% 1.14% 1.12% 1.12% 28 bps 1.40% 1.12% 28 bps Reserve Rate 4.08% 3.63% 3.38% 3.10% 3.09% 99 bps 4.08% 3.09% 99 bps 1 Purchased Credit Impaired ("PCI") loans are loans that were acquired in which a deterioration in credit quality occurred between the origination date and the acquisition date. These loans were initially recorded at fair value and accrete interest income over the estimated lives of the loans as long as cash flows are reasonably estimable, even if the loans are contractually past due. PCI loans are private student loans and are included in total loan receivables 2 Excludes PCI loans (described above) which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because the Company is recognizing interest income on a pool of loans, it is all considered to be performing Note: See Glossary of Financial Terms for definitions of financial terms

16 DISCOVER FINANCIAL SERVICES SEGMENT RESULTS (unaudited, in millions) Dec 31, 2017 Sep 30, 2017 Quarter Ended Twelve Months Ended Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Dec 31, 2017 vs. Dec 31, 2016 Dec 31, 2017 Dec 31, vs DIRECT BANKING Interest Income $2,556 $2,476 $2,338 $2,278 $2,258 $298 13% $9,648 $8,616 $1,032 12% Interest Expense % 1,648 1, % Net Interest Income 2,120 2,050 1,938 1,892 1, % 8,000 7, % Other Income % 1,607 1,611 (4) % Revenue Net of Interest Expense 2,543 2,451 2,346 2,267 2, % 9,607 8, % Provision for Loan Losses % 2,586 1, % Total Other Expense % 3,629 3, % Income Before Income Taxes $870 $867 $831 $824 $868 $2 % $3,392 $3,549 ($157) (4%) Net Interest Margin 10.28% 10.28% 10.11% 10.07% 10.07% 21 bps 10.19% 9.99% 20 bps Pretax Return on Loan Receivables 4.22% 4.35% 4.34% 4.39% 4.62% (40) bps 4.32% 4.91% (59) bps Allowance for Loan Loss (period end) $2,613 $2,525 $2,377 $2,258 $2,151 $462 21% $2,613 $2,151 $462 21% Reserve Change Build/ (Release) 1 $94 $148 $119 $107 $144 ($50) $468 $300 $168 PAYMENT SERVICES Interest Income $ $ $ $ $ $ NM $ $ $ NM Interest Expense NM NM Net Interest Income NM NM Other Income % % Revenue Net of Interest Expense % % Provision for Loan Losses 1 (1) 1 (8) (1) 2 (200%) (7) 1 (8) NM Total Other Expense (10) (20%) (10) (6%) Income Before Income Taxes $29 $36 $36 $44 $15 $14 93% $145 $107 $38 36% 1 Allowance for loan loss includes the net change in reserves on PCI pools having no remaining non-accretable difference which does not impact the reserve change build/(release) in provision for loan losses Note: See Glossary of Financial Terms for definitions of financial terms

17 DISCOVER FINANCIAL SERVICES GLOSSARY OF FINANCIAL TERMS Book Value per share represents total equity divided by ending common shares outstanding Capital Returned to Common Stockholders represents common stock dividends declared plus treasury share repurchases minus common stock issued under employee benefit plans and stock based compensation Common Equity Tier 1 Capital Ratio (Basel III transition) represents common equity tier 1 capital divided by risk weighted assets calculated under Basel III rules subject to transition provisions Common Equity Tier 1 Capital Ratio (Basel III fully phased-in) represents fully phased-in common equity tier 1 capital divided by risk weighted assets under fully phased-in Basel III rules. The Common Equity Tier 1 Capital Ratio (Basel III fully phasedin) is calculated using Basel III fully phased-in common equity tier 1 capital, a non-gaap measure. The Company believes that the common equity tier 1 capital ratio based on fully phased-in Basel III rules is an important complement to the existing capital ratios and for comparability to other financial institutions. For the corresponding reconciliation of common equity tier 1 capital and risk weighted assets calculated under fully phased-in Basel III rules to common equity tier 1 capital and risk weighted assets calculated under Basel III transition rules see the Reconciliation of GAAP to non-gaap data schedule Delinquency Rate (Over 30 Days) represents loans delinquent over thirty days divided by ending loans (total or respective loans, as appropriate) Delinquency Rate (Over 90 Days) represents loans delinquent over ninety days divided by ending loans (total or respective loans, as appropriate) Discover Card Sales Volume represents Discover card activity related to net sales Discover Card Volume represents Discover card activity related to net sales, balance transfers, cash advances and other activity Discover Network Proprietary Volume represents gross proprietary sales volume on the Discover Network Earnings Per Share represents net income allocated to common stockholders divided by the weighted average common shares outstanding Effective Tax Rate represents tax expense divided by income before income taxes Gross Principal Charge-off Rate represents gross principal charge-off dollars (annualized) divided by average loans for the reporting period Interest Yield represents interest income on loan receivables (annualized) divided by average loans for the reporting period Liquidity Portfolio represents cash and cash equivalents (excluding cash-in-process) and other investments Net Income Allocated to Common Stockholders represents net income less (i) dividends and accretion of discount on shares of preferred stock and (ii) income allocated to participating securities Net Interest Margin represents net interest income (annualized) divided by average total loans for the period. Net Principal Charge-off Rate represents net principal charge-off dollars (annualized) divided by average loans for the reporting period Operating Efficiency represents total other expense divided by revenue net of interest expense Payout Ratio represents capital returned to common stockholders divided by net income allocated to common stockholders Pretax Return on Loan Receivables represents income before income taxes (annualized) divided by total average loans for the period Proprietary Network Volume represents gross proprietary sales volume on the Discover Network Ratio of Earnings to Fixed Charges is a year-to-date statistic and represents income before income tax expense and fixed charges divided by fixed charges for the reporting period. Fixed charges are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and an estimate of interest within rental expense for the reporting period Regulatory Capital Ratios are regulatory measures used to evaluate capital adequacy. Under Basel III, for a Bank Holding Company to be considered "well-capitalized," total risk-based and tier 1 risk-based capital ratios of 10% and 6% respectively must be maintained. Under Basel III, to meet the regulatory minimum a Bank Holding Company must maintain total risk-based, tier 1 risk-based, tier 1 leverage, and common equity tier 1 ratios of 8%, 6%, 4%, and 4.5% respectively. As of January 1, 2015 regulatory capital ratios are calculated under Basel III rules subject to transition provisions. Total Risk Based Capital Ratio represents total capital divided by risk-weighted assets. Tier 1 Capital Ratio represents tier 1 capital divided by risk-weighted assets. Tier 1 Leverage Ratio represents tier 1 capital divided by average total assets. The Tier 1 Common Capital Ratio has been replaced by the Common Equity Tier 1 Ratio under Basel III Reserve Rate represents the allowance for loan losses divided by total loans Return on Equity represents net income (annualized) divided by average total equity for the reporting period Rewards Rate represents rewards cost divided by Discover Card sales volume Tangible Assets represents total assets less goodwill and intangibles Tangible Common Equity ("TCE"), a non-gaap financial measure, represents total common equity less goodwill and intangibles. The Company believes TCE is a more meaningful measure to investors of the net asset value of the Company. For corresponding reconciliation of TCE to a GAAP financial measure, see Reconciliation of GAAP to Non-GAAP data schedule Tangible Common Equity/Net Loans, a non-gaap measure, represents total common equity less goodwill and intangibles divided by total loans less the allowance for loan loss (period end) Tangible Common Equity per Share, a non-gaap measure, represents total common equity less goodwill and intangibles divided by ending common shares outstanding Tangible Common Equity/Tangible Assets, a non-gaap measure, represents total common equity less goodwill and intangibles divided by total assets less goodwill and intangibles Total Volume represents the transaction dollar volume from the PULSE network, Network Partners, Diners Club and proprietary Discover Network Undrawn Credit Facilities represents asset-backed conduit funding facilities and Federal Reserve discount window (excluding investments pledged to the Federal Reserve, which are included within the liquidity investment portfolio)

18 DISCOVER FINANCIAL SERVICES RECONCILIATION OF GAAP TO NON-GAAP DATA (unaudited, in millions) Quarter Ended Dec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 GAAP Total Common Equity $10,329 $10,627 $10,699 $10,705 $10,763 Less: Goodwill (255) (255) (255) (255) (255) Less: Intangibles (163) (163) (164) (165) (166) Tangible Common Equity 1 $9,911 $10,209 $10,280 $10,285 $10,342 Common Equity Tier 1 Capital (Basel III Transition) $10,114 $10,419 $10,492 $10,501 $10,592 Adjustments Related To Capital Components During Transition 2 (27) (25) (25) (26) (52) Common Equity Tier 1 Capital (Basel III Fully Phased-in) $10,087 $10,394 $10,467 $10,475 $10,540 Common Equity Tier 1 Capital Ratio (Basel III Transition) 11.6% 12.5% 13.0% 13.4% 13.2% Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) % 12.5% 13.0% 13.4% 13.2% GAAP Book Value Per Share $30.43 $30.56 $30.01 $29.46 $29.13 Less: Goodwill (0.72) (0.69) (0.68) (0.67) (0.67) Less: Intangibles (0.45) (0.45) (0.44) (0.43) (0.42) Less: Preferred Stock (1.57) (1.53) (1.49) (1.46) (1.44) Tangible Common Equity Per Share $27.69 $27.89 $27.40 $26.90 $ Tangible Common Equity ("TCE"), a non-gaap financial measure, represents common equity less goodwill and intangibles. A reconciliation of TCE to common equity, a GAAP financial measure, is shown above. Other financial services companies may also use TCE and definitions may vary, so users of this information are advised to exercise caution in comparing TCE of different companies. TCE is included because management believes that common equity excluding goodwill and intangibles is a more meaningful measure to investors of the true net asset value of the Company 2 Adjustments related to capital components for fully phased-in Basel III include the phase-in of the intangible asset exclusion 3 Common Equity Tier 1 Capital Ratio (Basel III Fully Phased-in) is calculated using Common Equity Tier 1 Capital (Basel III Fully Phased-in), a non-gaap measure, divided by Risk Weighted Assets (Basel III Fully Phased-in) Note: See Glossary of Financial Terms for definitions of financial terms

19 2017 and 4Q17 Financial Results January 24, DISCOVER FINANCIAL SERVICES Exhibit 99.3

20 The following slides are part of a presentation by Discover Financial Services (the "Company") in connection with reporting quarterly financial results and are intended to be viewed as part of that presentation. No representation is made that the information in these slides is complete. For additional financial, statistical, and business related information, as well as information regarding business and segment trends, see the earnings release and financial supplement included as exhibits to the Company s Current Report on Form 8-K filed today and available on the Company s website ( and the SEC s website ( The information provided herein includes certain non-gaap financial measures. The reconciliations of such measures to the comparable GAAP figures are included at the end of this presentation, which is available on the Company s website and the SEC s website. The presentation contains forward-looking statements. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made, which reflect management s estimates, projections, expectations or beliefs at that time, and which are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of certain risks and uncertainties that may affect the future results of the Company, please see "Special Note Regarding Forward-Looking Statements," "Risk Factors," "Business Competition," "Business Supervision and Regulation" and "Management s Discussion and Analysis of Financial Condition and Results of Operations" in the Company s Annual Report on Form 10-K for the year ended December 31, 2016, and under Management s Discussion and Analysis of Financial Condition and Results of Operations in the company s Quarterly Report on Form 10-Q for the quarters ended September 30, 2017, June 30, 2017, and March 31, 2017, which are filed with the SEC and available at the SEC's website ( The Company does not undertake to update or revise forward-looking statements as more information becomes available. Notice 2

21 Solid execution drove net income of $2.1Bn, diluted EPS of $5.42 and 19% return on equity Adjusted to exclude non-recurring charges, primarily related to the passage of tax reform, diluted EPS was $5.98(1) Continued focus on prime revolvers led to strong card receivables and revenue growth Record originations in personal loans and student loans Credit normalization continued as a result of secular growth of consumer credit as well as our organic growth; credit environment remains benign and risk-adjusted returns are strong Payment Services network volume increased 12% to $203Bn and income before taxes increased 36% Achieved positive operating leverage of 4% driven by prudent expense management, while continuing to invest for growth and new capabilities Achieved a 123% payout ratio via return of $2.5Bn of capital through dividends and share repurchases 2017 Full Year Performance 3 Note(s) 1. Adjusted diluted EPS is a non-gaap financial measure which should be viewed in addition to, and not as a substitute for, the Company s reported results. Management believes this information helps investors understand the effect of activities that are not expected to continue and provides a useful metric to evaluate the Company's ongoing operating performance; see appendix for a reconciliation

22 Receivables YOY Growth $65.8 $70.0 $72.4 $77.3 $84.2 5% 6% 3% 7% 9% Ending Loans ($Bn) Net Charge-off Rate Solid loan growth and credit performance % 2.04% 2.01% 2.16% 2.70%

23 Note(s) 1. Adjusted Diluted EPS is a non-gaap financial measure which should be viewed in addition to, and not as a substitute for, the Company s reported results. Management believes this information helps investors understand the effect of activities that are not expected to continue and provides a useful metric to evaluate the Company's ongoing operating performance; see appendix for a reconciliation 2. Pre-tax, pre-provision income, which is derived by adding provision for loan losses to pre-tax income, is a non-gaap financial measure which should be viewed in addition to, and not as a substitute for, the Company s reported results. Management believes this information helps investors understand the effect of provision for loan losses on reported results and provides an alternate presentation of the Company s performance; see appendix for a reconciliation Highlights Diluted EPS of $0.99 Revenue net of interest expense of $2.6Bn, up 11% YOY, driven by higher net interest income Provision for loan losses increased $101MM YOY (17%) on higher net charge-offs, partially offset by a smaller reserve build Expenses rose 15%, driven by investments to support growth and new capabilities Income tax expense includes non- recurring charges of $179MM associated with the passage of tax reform 4Q17 Summary Financial Results B / (W) ($MM, except per share data) 4Q17 4Q16 $ Δ % Δ Revenue Net of Interest Expense $2,614 $2,358 $256 11% Net Principal Charge-off (148) (34%) Reserve Change build/(release) % Provision for Loan Losses (101) (17%) Operating Expense 1, (139) (15%) Direct Banking % Payment Services % Total Pre-Tax Income % Income Tax Expense (192) (60%) Net Income $387 $563 ($176) (31%) ROE 14% 20% Diluted EPS $0.99 $1.40 ($0.41) (29%) EPS From Non-Recurring Charges ($0.56) Adjusted Diluted EPS (1) $1.55 $ 1.40 $ % Pre-Tax, Pre-Provision Income (2) $1,578 $1,461 $117 8% 5

24 Payment Services 4Q16 4Q17 $77.3 $61.5 $9.0 $6.5 $84.2 $67.3 $9.2 $7.4 +9% +9% +2% +14% Note(s) 1. Volume is derived from data provided by licensees for Diners Club branded cards issued outside of North America and is subject to subsequent revision or amendment Total Network Volume up 13% YOY Ending Loans ($Bn) Volume ($Bn) 4Q16 4Q17 $34.0 $35.6 $7.3 $3.2 $36.3 $42.4 $8.4 $3.3 Total Card Student Personal +7% +19% +14% 1% Proprietary PULSE Network PartnersDiners (1) 4Q17 Loan and Volume Growth 6

25 Note(s) 1. Rewards cost divided by Discover card sales volume Highlights Receivables growth and margin expansion drove 12% YOY increase in net interest income Net discount and interchange revenue increased $29MM (11%) YOY driven by a 9% increase in card sales volume Rewards rate decreased by 3 bps YOY as a result of lower promotional rewards 4Q17 Revenue Detail B / (W) ($MM) 4Q17 4Q16 $ Δ % Δ Interest Income $2,556 $2,258 $298 13% Interest Expense (70) (19%) Net Interest Income 2,120 1, % Discount/Interchange Revenue % Rewards Cost (23) (6%) Net Discount/Interchange Revenue % Protection Products Revenue (5) (8%) Loan Fee Income % Transaction Processing Revenue % Other Income (2) (10%) Total Non-Interest Income % Revenue Net of Interest Expense $2,614 $2,358 $256 11% Direct Banking $2,543 $2,293 $250 11% Payment Services % Revenue Net of Interest Expense $2,614 $2,358 $256 11% Change ($MM) 4Q17 4Q16 QOQ YOY Discover Card Sales Volume $35,339 $32,486 10% 9% Rewards Rate (1) 1.23% 1.26% -7 bps -3 bps 7

26 Highlights Net interest margin on receivables increased 21 bps YOY on higher loan yields, partially offset by higher funding costs Credit card yield increased 17 bps YOY as the prime rate increased, partially offset by portfolio mix and higher interest charge-offs Average consumer deposits grew 10% YOY and composed 46% of total average funding Funding costs on interest-bearing liabilities increased 14 bps YOY, driven by higher market rates partially offset by tighter credit spreads on refinanced long-term debt 4Q17 Net Interest Margin 4Q17 4Q16 ($MM) Average Balance Rate Average Balance Rate Credit Card $64, % $59, % Private Student 9, % 8, % Personal 7, % 6, % Other % % Total Loans 81, % 74, % Other Interest-Earning Assets 15, % 14, % Total Interest-Earning Assets $97, % $88, % Direct to Consumer and Affinity $38, % $35, % Brokered Deposits and Other 18, % 14, % Interest Bearing Deposits 57, % 49, % Borrowings 26, % 25, % Total Interest-Bearing Liabilities $83, % $75, % Change (%) 4Q17 QOQ YOY Total Interest Yield 12.14% -1bps 26bps NIM on Receivables 10.28% 0bps 21bps NIM on Interest-Earning Assets 8.64% 4bps 17bps 8

27 Note(s) 1. Defined as reported total operating expense divided by revenue net of interest expense Highlights Employee compensation and benefits up 17% YOY, primarily on higher staffing levels, as well as higher average salaries Also includes $16MM related to a one-time bonus granted to eligible employees following the passage of tax reform Marketing up 21% YOY as a result of higher acquisition costs and brand advertising Professional fees up 24% YOY, primarily due to investments in technology and analytic capabilities 4Q17 Operating Expense Detail B / (W) ($MM) 4Q17 4Q16 $ Δ % Δ Employee Compensation and Benefits $411 $352 ($59) (17%) Marketing and Business Development (37) (21%) Information Processing & Communications % Professional Fees (37) (24%) Premises and Equipment (3) (13%) Other Expense (4) (4%) Total Operating Expense $1,036 $897 ($139) (15%) Direct Banking ($149) (18%) Payment Services % Total Operating Expense $1,036 $897 ($139) (15%) Operating Efficiency(1) 39.7% 38.0% (170) bps 9

28 Total Company Loans Credit Card Loans Private Student Loans Personal Loans NCO rate (%) 30+ day DQ rate ex-pci (%) 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q NCO rate (%) 30+ day DQ rate (%) 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q NCO rate (%) 30+ day DQ rate (%) 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q NCO rate (%) 30+ day DQ rate ex-pci (%) 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q Credit Performance Trends 10

29 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q Capital Trends Note(s) 1. Common Equity Tier 1 Capital Ratio (Basel III Transition) 2. Payout Ratio is displayed on a trailing twelve month basis. This represents the trailing twelve months Capital Return to Common Stockholders divided by the trailing twelve months Net Income Allocated to Common Stockholders Common Equity Tier 1 (CET1) Capital Ratio(1) (%) Payout Ratio(2) (%) 11

30 Balance Sheet Total loans grew 9% ($7.0Bn) YOY with strong contributions from all primary lending products Credit card loans grew 9% ($5.8Bn) YOY as sales volume increased 9% Average consumer deposits grew 10% ($3.4Bn) YOY, while deposit rates increased 18 bps 4Q17 Financial Summary 12 Total NCO rate of 2.85%, up 54 bps YOY Driven by supply- induced credit normalization and loan seasoning Capital plan execution Repurchased 8.1MM shares of common stock for $555MM CET1 capital ratio(1) of 11.6%, down 160 bps YOY Net income of $387MM and diluted EPS of $0.99 Revenue growth of 11% on higher net interest income NIM of 10.28%, up 21 bps YOY Efficiency ratio up 170 bps YOY to 40% reflecting investments in growth and technology Credit and Capital Profitability Note(s) 1. Basel III Transition

31 2018 Guidance 2017 Actual 2018 Guidance Total Loan Growth 9% 7-9% Operating Expense $3.8Bn $ Bn Rewards Rate 1.24% % Total Company NIM 10.2% % Total Net Charge-off Rate 2.7% % Effective Tax Rate 24% 13

32 Note(s) 1. Adjusted Diluted EPS is a non-gaap financial measure which should be viewed in addition to, and not as a substitute for, the Company s reported results. Management believes this information helps investors understand the effect of activities that are not expected to continue and provides a useful metric to evaluate the Company's ongoing operating performance; see appendix for a reconciliation Appendix Reconciliation of GAAP to Non-GAAP Data (unaudited) 4Q17 Full Year 2017 Diluted EPS $0.99 $5.42 Adjusted for: Employee compensation one-time bonus Original issuance cost related to series B preferred stock redemption Tax related one-time items Adjusted diluted EPS (1) $1.55 $

33 Note(s) 1. Pre-tax, pre-provision income, which is derived by adding provision for loan losses to pre-tax income, is a non-gaap financial measure which should be viewed in addition to, and not as a substitute for, the Company's reported results. Management believes this information helps investors understand the effect of provision for loan losses on reported results and provides an alternate presentation of the Company's performance Appendix Reconciliation of GAAP to Non-GAAP Data (unaudited, $MM) 4Q17 4Q16 Provision for loan losses $679 $578 Income before income taxes Pre-tax, pre-provision income(1) $1,578 $1,461 15

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