Discover Financial Services Reports Fourth Quarter Results:Net Income of $432 Million and Earnings Per Share of $0.89

Continuing Discontinued Net Income Operations Operations Earnings Diluted EPS Earnings Earnings Diluted EPS (millions) (millions) (millions) 4Q08 $444 $0.92 ($12 ) $432 $0.89 4Q07 $210 $0.44 ($266 ) ($56 ) ($0.12 ) 2008 $1,063 $2.20 ($135 ) $928 $1.92 2007 $964 $2.01 ($375 ) $589 $1.23

Full year income from continuing operations was $1.1 billion, up 10% from last year. Fourth quarter income from continuing operations was $444 million, up from $210 million in the fourth quarter of 2007. Income from continuing operations includes antitrust litigation settlement proceeds of approximately $535 million (after-tax) in the fourth quarter of 2008. Discontinued operations relates to the sale of the Goldfish business.

Fourth Quarter Highlights

-- The company grew managed loans 6% from last year to $51 billion; Discover Card sales declined 2% to $22 billion.

-- The fourth-quarter managed net charge-off rate was 5.48% and the managed over 30 days delinquency rate was 4.56%.

-- The company added reserves in excess of charge-offs of $415 million.

-- Owned loans grew $3.5 billion from the third quarter, including $2.6 billion due to maturing securitizations retained on the balance sheet.

-- Total deposits grew 15% to $29 billion, including $6 billion of direct-to-consumer deposit balances.

-- Third-Party Payments segment volume grew 39% to $34 billion, including $7 billion of Diners Club International volume.

"Our results and financial position reflect our conservative orientation toward growth, credit risk and capital management as we position Discover to weather the economic downturn," said David Nelms, chief executive officer of Discover Financial Services. "As part of our capital management, we are seeking to participate in the Treasury's Capital Purchase Program which will further support our consumer lending operations."

Settlement of Antitrust Litigation

On October 27, 2008 Discover reached a $2.75 billion settlement of its antitrust lawsuit with Visa and MasterCard. Discover received an $863 million payment in November 2008, and expects to receive the remaining proceeds in equal $472 million installments over the four quarters of 2009. The proceeds will be reflected as revenue in Discover's U.S. Card segment in the period earned.

At the time of the spin-off of the company, Morgan Stanley and Discover entered into an agreement governing the manner in which the antitrust case was to be pursued and settled and how proceeds of the litigation were to be shared. The company has notified Morgan Stanley that it breached the agreement and the amount of the dividend to Morgan Stanley, if any, is a matter of dispute.

Liquidity and Capital

The company continues to maintain liquidity and capital positions that it believes are appropriate for the current environment. Cash liquidity was $9.4 billion and tangible equity was $5.5 billion, or 11.0% of net managed receivables, at November 30, 2008. The company applied to the U.S. Treasury to participate in the Capital Purchase Program and to the Federal Reserve to become a bank holding company.

Segment Results (Managed Basis):

U.S. Card

Managed loans grew to $51 billion, up 6% from last year and 1% from last quarter as decreased consumer spending and balance transfer activity were offset by lower cardmember payments and growth in installment loans. Sales volume decreased 2% versus fourth quarter of 2007, and increased 2% on a full year basis.

Credit performance of the Card portfolio was consistent with Discover's expectation as charge-offs rose, reflecting the deteriorating economic environment. The managed over 30 days delinquency rate of 4.56% was up 71 basis points from the third quarter of 2008, and 98 basis points from last year. The managed net charge-off rate increased to 5.48% for the fourth quarter of 2008, up 28 and 163 basis points, respectively, from last quarter and last year. The full year net charge-off rate was 5.01% up 118 basis points from last year. Based on current trends within the portfolio and in the economic environment, the company believes that the managed net charge-off rate in the first quarter of 2009 will exceed 6%.

Fourth Quarter

Pretax income was $646 million in the fourth quarter of 2008, including other income of $863 million related to proceeds from the antitrust settlement. Pretax income was $321 million for the fourth quarter of 2007.

Managed net interest income increased $162 million, or 18%, an improvement of 79 basis points over fourth quarter of 2007. Higher net interest income benefited from lower cost of funds, growth in loan balances and accretion of balance transfer fees previously included in loan fee revenue, partially offset by higher interest charge-offs.

Provision for loan losses increased $521 million, or 89%, due to higher net charge-offs and an increase in loan loss reserves in excess of charge-offs in the quarter. The reserve increase in excess of charge-offs of $415 million resulted from a higher reserve rate as well as higher on-balance sheet loans due to maturing securitizations.

Other income increased $630 million, reflecting the antitrust settlement partially offset by a reduction in the fair value of the interest-only strip receivable. The decline in the fair value of the interest-only strip receivable was due to no securitization gains in the fourth quarter as the company did not enter into new securitization transactions, along with higher anticipated charge-offs in the current environment.

Expenses decreased $54 million, or 9%, primarily attributable to lower compensation and marketing expense partially offset by increased professional fees. Compensation expense included a $39 million one-time benefit due to curtailment of the company's pension plan. Marketing declined due to lower account acquisition and balance transfer volume as well as lower advertising costs.

Full Year

Pretax income was $1.6 billion in 2008, including other income of $863 million related to the antitrust settlement. Pretax income was $1.5 billion for 2007.

Managed net interest income increased $551 million, or 15%, an improvement of 79 basis points over 2007, reflecting an increase in interest income and a decrease in interest expense. Interest income benefited from growth in loan balances and the transfer of balance transfer fees to interest income, partially offset by higher interest charge-offs and lower investment income. Interest expense decreased reflecting a lower cost of funds, partially offset by higher borrowings to fund higher loan balances.

Provision for loan losses increased $1.2 billion, or 66%, due to higher net charge-offs and an increase in loan loss reserves in excess of charge-offs during the year. The reserve increase in excess of charge-offs of $615 million resulted from a higher reserve rate as well as higher on-balance sheet loans due to maturing securitizations.

Other income increased $673 million reflecting the antitrust settlement and higher discount and interchange revenue, partially offset by a write-down of the interest-only strip receivable and the transfer of balance transfer fees to interest income. Discount and interchange revenue benefited from growth in sales volume.

Expenses decreased $79 million, or 3%, primarily attributable to the pension curtailment benefit; lower account acquisition and promotional marketing activity; and a decrease in costs related to litigation.

Third-Party Payments

Fourth Quarter

The Third-Party Payments segment transaction volume was $34 billion, up 39% from last year, reflecting the addition of Diners Club International volume of $7 billion, as well as increased volumes on the PULSE and Discover networks.

Pretax income of $21 million was up $13 million from the fourth quarter of 2007. Diners Club International contributed $4 million to the segment's pretax income. Revenue increased $24 million due to increased volumes and fee revenues, as well as a $15 million contribution from Diners Club International. Expenses increased $11 million due to the inclusion of Diners Club International.

Full Year

The Third-Party Payments segment transaction volume was a record $125 billion, up 36% from last year, reflecting the addition of Diners Club International volume of $13 billion, as well as increased volumes on the PULSE and Discover networks.

Pretax income of $81 million was up $44 million from 2007 including $11 million related to Diners Club International, which was acquired in June 2008. Revenue increased $61 million due to increased volumes and fee revenues as well as a $28 million contribution from Diners Club International. Expenses increased $17 million due to the inclusion of Diners Club International.

Discontinued Operations

Discontinued operations represent the company's Goldfish business in the United Kingdom, which was sold to Barclays Bank PLC on March 31, 2008. In the fourth quarter of 2008, the company recognized a loss from discontinued operations, net of tax, of $12 million versus a loss of $266 million in the fourth quarter of 2007. The fourth quarter of 2007 included an impairment charge to write down goodwill and intangibles to fair value of $279 million, after-tax.

Dividend Declaration/Stock Repurchase Program

The company's board declared a cash dividend of $.06 per share, payable on Jan. 22, 2009, to stockholders of record at the close of business on Jan. 2, 2009. No stock repurchases were conducted under the stock repurchase program during the fourth quarter.

Conference Call and Webcast Information

The company will host a conference call to discuss its fourth quarter results on Thursday, Dec. 18, 2008, at 10 a.m. Central time. Interested parties can listen to the conference call via a live audio webcast at http://investorrelations.discoverfinancial.com.

About Discover Financial Services

Discover Financial Services (NYSE: DFS | Quote | Chart | News | PowerRating) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. The company operates the Discover Card, America's cash rewards pioneer. Since its inception in 1986, the company has become one of the largest card issuers in the United States. Its payments businesses consist of the Discover Network, with millions of merchant 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 185 countries and territories. For more information, visit www.discoverfinancial.com.

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. Both the earnings release and the Financial Supplement are available online in the Investor Relations section at www.discoverfinancial.com.

Financial information presented on a managed basis assumes that loans that have been securitized were not sold and presents financial information regarding these loans in a manner similar to the presentation of financial information regarding loans that have not been sold. Management believes it is useful for investors to consider the credit performance of the entire managed loan portfolio to understand the quality of loan originations and the related credit risks inherent in the owned portfolio and retained interests in securitization. For more information, and a detailed reconciliation, please refer to the schedule titled "Reconciliation of GAAP to Managed Data" attached to this press release.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Discover Financial Services' 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: the actions and initiatives of current and potential competitors; our ability to manage credit risks and securitize our receivables at acceptable rates and under sale accounting treatment; changes in economic variables, such as the number and size of personal bankruptcy filings, the rate of unemployment and the levels of consumer confidence and consumer debt; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; the availability and cost of funding and capital; access to U.S. debt and deposit markets; losses in our investment portfolio; the ability to increase or sustain Discover Card usage or attract new cardmembers and introduce new products or services; our ability to attract new merchants and maintain relationships with current merchants; our ability to successfully integrate the Diners Club International network and maintain relationships with network participants; material security breaches of key systems; unforeseen and catastrophic events; our reputation; the potential effects of technological changes; the effect of political, economic and market conditions and geopolitical events; unanticipated developments relating to lawsuits, investigations or similar matters; the impact of current, pending and future legislation, regulation and regulatory and legal actions, including the Federal Reserve Board's proposed amendments limiting certain credit card practices; our ability to attract and retain employees; the ability to protect our intellectual property; the impact of any potential future acquisitions; investor sentiment; and the restrictions on our operations resulting from indebtedness incurred related to our spin-off in 2007.

Additional factors that could cause Discover Financial Services' results to differ materially from those described in the forward-looking statements can be found under "Part I. Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended November 30, 2007 and "Part II. Other Information - Item 1A. Risk Factors" in the Company's Quarterly Report on Form 10-Q for the quarter ended May 31, 2008, filed with the SEC and available at the SEC's internet site (http://www.sec.gov).

Discover Financial Services GAAP Basis (unaudited, dollars in thousands, except per share statistics) Quarter Ended Nov 30, 2008 Aug 31, 2008 Nov 30, 2007 Earnings Summary Interest Income $736,006 $681,692 $659,676 Interest Expense 329,672 305,643 350,917 Net Interest Income 406,334 376,049 308,759 Other Income (1) 1,568,901 875,121 952,500 Revenue Net of Interest Expense 1,975,235 1,251,170 1,261,259 Provision for Loan Losses 714,176 364,838 296,186 Employee Compensation and Benefits 187,306 222,426 208,910 Marketing and Business Development 119,382 137,928 155,976 Information Processing & Communications 81,543 76,675 85,034 Professional Fees 111,645 82,775 94,380 Premises and Equipment 20,676 20,274 19,348 Other Expense 73,530 72,469 73,083 Total Other Expense 594,082 612,547 636,731 Income (Loss) Before Income Taxes (1) 666,977 273,785 328,342 Tax Expense 223,336 94,885 118,368 Income From Continuing Operations (1) 443,641 178,900 209,974 Discontinued Operations, Net of Tax (2) (11,306 ) 1,153 (266,458 ) Net Income (Loss) (1, 2) $432,335 $180,053 ($56,484 ) Effective Tax Rate From Continuing Operations 33.5 % 34.7 % 36.1 % Balance Sheet Statistics (3) Total Assets $39,892,382 $37,283,548 $33,449,702 Total Equity $5,924,044 $6,000,393 $5,599,422 Total Tangible Equity $5,465,304 $5,539,274 $5,284,232 Tangible Equity/Total Owned Assets 13.7 % 14.9 % 15.8 % ROE (1, 2) 29 % 12 % (4 %) ROE from Continuing Operations (1) 30 % 12 % 15 % Allowance for Loan Loss (period end) $1,374,585 $959,769 $759,925 Change in Loan Loss Reserves $414,816 $112,994 $130,467 Reserve Rate 5.45 % 4.41 % 3.65 % Interest-only Strip Receivable (period end) $300,120 $408,649 $400,313 Net Revaluation of Retained Interests ($116,335 ) ($33,513 ) $37,475 Per Share Statistics Basic EPS (1, 2) $0.90 $0.38 ($0.12 ) Basic EPS from Continuing Operations (1) $0.92 $0.38 $0.44 Diluted EPS (1, 2) $0.89 $0.37 ($0.12 ) Diluted EPS from Continuing Operations (1) $0.92 $0.37 $0.44 Stock Price (period end) $10.23 $16.45 $17.37 Book Value $12.34 $12.51 $11.72 Ending Shares Outstanding (000's) 479,987 479,764 477,688 Weighted Average Shares Outstanding (000's) 479,931 479,618 477,567 Weighted Average Shares Outstanding (fully diluted) (000's) 484,558 484,128 477,567 Loan Receivables (3) Total Loans - Owned $25,216,611 $21,767,483 $20,831,117 Average Total Loans - Owned $22,945,494 $21,053,804 $19,405,775 Interest Yield 11.36 % 11.41 % 10.51 % Net Principal Charge-off Rate 5.25 % 4.76 % 3.43 % Delinquency Rate (over 30 days) 4.35 % 3.58 % 3.26 % Delinquency Rate (over 90 days) 2.06 % 1.73 % 1.51 % Transactions Processed on Networks (000's) Discover Network 377,356 388,504 378,438 PULSE Network 644,045 713,791 611,518 Total 1,021,401 1,102,295 989,956 Volume PULSE Network $25,033,235 $28,364,575 $23,035,361 Third-Party Issuers 1,538,013 1,711,617 1,458,959 Diners Club International (4) 7,467,235 5,227,795 - Total Third-Party Payments 34,038,483 35,303,987 24,494,320 Discover Network - Proprietary (5) 22,875,272 25,117,321 23,482,095 Total $56,913,755 $60,421,308 $47,976,415

(1) The quarter ended November 30, 2008 includes proceeds of $863 million pre-tax (estimated $535 million after-tax) related to the antitrust settlement. (2) The quarter ended November 30, 2007 includes a $391 million pre-tax ($279 million after-tax) non-cash impairment charge related to the company's Goldfish business. (3) Based on Continuing Operations except equity and ROE. Equity is based on company's equity. (4) 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. (5) Gross proprietary sales volume on the Discover Network.

Discover Financial Services Managed Basis (1) (unaudited, dollars in thousands) Quarter Ended Nov 30, 2008 Aug 31, 2008 Nov 30, 2007 Earnings Summary Interest Income $1,682,267 $1,638,250 $1,667,418 Interest Expense 602,450 534,887 750,638 Net Interest Income 1,079,817 1,103,363 916,780 Other Income (2) 1,287,213 536,997 633,014 Revenue Net of Interest Expense 2,367,030 1,640,360 1,549,794 Provision for Loan Losses 1,105,971 754,028 584,721 Employee Compensation and Benefits 187,306 222,426 208,910 Marketing and Business Development 119,382 137,928 155,976 Information Processing & Communications 81,543 76,675 85,034 Professional Fees 111,645 82,775 94,380 Premises and Equipment 20,676 20,274 19,348 Other Expense 73,530 72,469 73,083 Total Other Expense 594,082 612,547 636,731 Income (Loss) Before Income Taxes (2) 666,977 273,785 328,342 Tax Expense 223,336 94,885 118,368 Income From Continuing Operations (2) 443,641 178,900 209,974 Discontinued Operations, Net of Tax( 2, 3) (11,306 ) 1,153 (266,458 ) Net Income (Loss) (2, 3) $432,335 $180,053 ($56,484 ) Balance Sheet Statistics (4) Total Assets $65,620,476 $65,632,825 $60,591,475 Total Equity (5) $5,924,044 $6,000,393 $5,599,422 Total Tangible Equity (5) $5,465,304 $5,539,274 $5,284,232 Tangible Equity/Net Managed Receivables 11.0 % 11.2 % 11.1 % Tangible Equity/Total Managed Assets 8.3 % 8.4 % 8.7 % Net Yield on Loan Receivables 8.56 % 8.95 % 7.76 % Return on Loan Receivables (2) 3.52 % 1.45 % 1.78 % Loan Receivables (4) Total Loans - Managed $51,095,278 $50,427,305 $48,180,436 Average Total Loans - Managed $50,707,090 $49,019,083 $47,381,471 Managed Interest Yield 12.65 % 12.67 % 12.84 % Managed Net Principal Charge-off Rate 5.48 % 5.20 % 3.85 % Managed Delinquency Rate (over 30 days) 4.56 % 3.85 % 3.58 % Managed Delinquency Rate (over 90 days) 2.17 % 1.88 % 1.67 % Credit Card Volume $25,318,553 $28,611,680 $26,159,776 Credit Card Sales Volume $22,025,264 $24,601,611 $22,588,639 Segment - Income Before Income Taxes U.S. Card $646,427 $245,241 $320,751 Third-Party Payments 20,550 28,544 7,591 Total $666,977 $273,785 $328,342

(1 )Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule. (2) The quarter ended November 30, 2008 includes proceeds of $863 million pre-tax (estimated $535 million after-tax) related to the antitrust settlement. (3 )The quarter ended November 30, 2007 includes a $391 million pre-tax ($279 million after-tax) non-cash impairment charge related to the company's Goldfish business. (4) Based on Continuing Operations. Equity is based on company's equity. (5) Balance on a GAAP and Managed basis is the same.

Discover Financial Services U.S. Card Segment Managed Basis(1) (unaudited, dollars in thousands) Quarter Ended Nov 30, 2008 Aug 31, 2008 Nov 30, 2007 Earnings Summary Interest Income $1,680,925 $1,637,588 $1,666,768 Interest Expense 602,386 534,870 750,638 Net Interest Income 1,078,539 1,102,718 916,130 Other Income (2) 1,234,100 482,311 603,709 Revenue Net of Interest Expense 2,312,639 1,585,029 1,519,839 Provision for Loan Losses 1,105,971 754,028 584,721 Total Other Expense 560,241 585,760 614,367 Income (Loss) Before Income Taxes (2) $646,427 $245,241 $320,751 Net Yield on Loan Receivables 8.55 % 8.95 % 7.76 % Pretax Return on Loan Receivables (2) 5.13 % 1.99 % 2.72 % Loan Receivables Total Loans $51,095,278 $50,427,305 $48,180,436 Average Total Loans $50,707,090 $49,019,083 $47,381,471 Managed Interest Yield 12.65 % 12.67 % 12.84 % Managed Net Principal Charge-off Rate 5.48 % 5.20 % 3.85 % Managed Delinquency Rate (over 30 days) 4.56 % 3.85 % 3.58 % Managed Delinquency Rate (over 90 days) 2.17 % 1.88 % 1.67 % Credit Card Loans Credit Card Loans - Managed $49,692,974 $49,348,507 $47,929,242 Average Credit Card Loans - Managed $49,420,412 $48,168,124 $47,251,899 Managed Interest Yield 12.72 % 12.70 % 12.85 % Managed Net Principal Charge-off Rate 5.59 % 5.28 % 3.85 % Managed Delinquency Rate (over 30 days) 4.66 % 3.92 % 3.59 % Managed Delinquency Rate (over 90 days) 2.22 % 1.92 % 1.68 % Total Credit Card Volume $25,318,553 $28,611,680 $26,159,776 Sales Volume $22,025,264 $24,601,611 $22,588,639

(1 )Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule. (2) The quarter ended November 30, 2008 includes proceeds of $863 million pre-tax related to the antitrust settlement.

Discover Financial Services Third-Party Payments Segment (unaudited, dollars in thousands) Quarter Ended Nov 30, 2008 Aug 31, 2008 Nov 30, 2007 Earnings Summary Interest Income $1,342 $662 $650 Interest Expense 64 17 - Net Interest Income 1,278 645 650 Other Income 53,113 54,686 29,305 Revenue Net of Interest Expense 54,391 55,331 29,955 Provision for Loan Losses - - - Total Other Expense 33,841 26,787 22,364 Income (Loss) Before Income Taxes $20,550 $28,544 $7,591 Volume PULSE Network $25,033,235 $28,364,575 $23,035,361 Third-Party Issuers 1,538,013 1,711,617 1,458,959 Diners Club International (1) 7,467,235 5,227,795 - Total Third-Party Payments $34,038,483 $35,303,987 $24,494,320 Transactions Processed on PULSE Network (000's) 644,045 713,791 611,518

(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.

Discover Financial Services Reconciliation of GAAP to Managed Data (1) (unaudited, dollars in thousands) Quarter Ended Nov 30, 2008 Aug 31, 2008 Nov 30, 2007 Interest Income GAAP Basis $736,006 $681,692 $659,676 Securitization Adjustments (1) 946,261 956,558 1,007,742 Managed Basis $1,682,267 $1,638,250 $1,667,418 Interest Expense GAAP Basis $329,672 $305,643 $350,917 Securitization Adjustments 272,778 229,244 399,721 Managed Basis $602,450 $534,887 $750,638 Net Interest Income GAAP Basis $406,334 $376,049 $308,759 Securitization Adjustments 673,483 727,314 608,021 Managed Basis $1,079,817 $1,103,363 $916,780 Other Income GAAP Basis $1,568,901 $875,121 $952,500 Securitization Adjustments (281,688 ) (338,124 ) (319,486 ) Managed Basis $1,287,213 $536,997 $633,014 Revenue Net of Interest Expense GAAP Basis $1,975,235 $1,251,170 $1,261,259 Securitization Adjustments 391,795 389,190 288,535 Managed Basis $2,367,030 $1,640,360 $1,549,794 Provision for Loan Losses GAAP Basis $714,176 $364,838 $296,186 Securitization Adjustments 391,795 389,190 288,535 Managed Basis $1,105,971 $754,028 $584,721 Total Assets GAAP Basis $39,892,382 $37,283,548 $33,449,702 Securitization Adjustments 25,728,094 28,349,277 27,141,773 Managed Basis $65,620,476 $65,632,825 $60,591,475 Tangible Equity/Total Assets GAAP Basis 13.7 % 14.9 % 15.8 % Securitization Adjustments 21.2 % 19.5 % 19.5 % Managed Basis 8.3 % 8.4 % 8.7 % Loan Receivables Total Loans GAAP Basis $25,216,611 $21,767,483 $20,831,117 Securitization Adjustments 25,878,667 28,659,822 27,349,319 Managed Basis $51,095,278 $50,427,305 $48,180,436 Average Total Loans GAAP Basis $22,945,494 $21,053,804 $19,405,775 Securitization Adjustments 27,761,596 27,965,279 27,975,696 Managed Basis $50,707,090 $49,019,083 $47,381,471 Interest Yield GAAP Basis 11.36 % 11.41 % 10.51 % Securitization Adjustments 13.71 % 13.61 % 14.45 % Managed Basis 12.65 % 12.67 % 12.84 % Net Principal Charge-off Rate GAAP Basis 5.25 % 4.76 % 3.43 % Securitization Adjustments 5.68 % 5.54 % 4.14 % Managed Basis 5.48 % 5.20 % 3.85 % Delinquency Rate (over 30 days) GAAP Basis 4.35 % 3.58 % 3.26 % Securitization Adjustments 4.77 % 4.06 % 3.82 % Managed Basis 4.56 % 3.85 % 3.58 % Delinquency Rate (over 90 days) GAAP Basis 2.06 % 1.73 % 1.51 % Securitization Adjustments 2.27 % 2.00 % 1.79 % Managed Basis 2.17 % 1.88 % 1.67 % Credit Card Loans Credit Card Loans GAAP Basis $23,814,307 $20,688,685 $20,579,923 Securitization Adjustments 25,878,667 28,659,822 27,349,319 Managed Basis $49,692,974 $49,348,507 $47,929,242 Average Credit Card Loans GAAP Basis $21,658,816 $20,202,845 $19,276,203 Securitization Adjustments 27,761,596 27,965,279 27,975,696 Managed Basis $49,420,412 $48,168,124 $47,251,899 Interest Yield GAAP Basis 11.45 % 11.45 % 10.53 % Securitization Adjustments 13.71 % 13.61 % 14.45 % Managed Basis 12.72 % 12.70 % 12.85 % Net Principal Charge-off Rate GAAP Basis 5.47 % 4.92 % 3.44 % Securitization Adjustments 5.68 % 5.54 % 4.14 % Managed Basis 5.59 % 5.28 % 3.85 % Delinquency Rate (over 30 days) GAAP Basis 4.55 % 3.72 % 3.28 % Securitization Adjustments 4.77 % 4.06 % 3.82 % Managed Basis 4.66 % 3.92 % 3.59 % Delinquency Rate (over 90 days) GAAP Basis 2.16 % 1.81 % 1.53 % Securitization Adjustments 2.27 % 2.00 % 1.79 % Managed Basis 2.22 % 1.92 % 1.68 %

(1 )Securitization Adjustments present the effect of loan securitization by recharacterizing as securitization income the portions of the following items that relate to the securitized loans: interest income, interest expense, provision for loan losses, discount and interchange revenue and loan fee revenues. Securitization income is reported in other income.

Discover Financial Services GAAP Basis (unaudited, dollars in thousands, except per share statistics) Year Ended Nov 30, 2008 Nov 30, 2007 Earnings Summary Interest Income $2,692,563 $2,584,402 Interest Expense 1,288,004 1,223,270 Net Interest Income 1,404,559 1,361,132 Other Income (1) 4,264,458 3,376,682 Revenue Net of Interest Expense 5,669,017 4,737,814 Provision for Loan Losses 1,595,615 733,887 Employee Compensation and Benefits 845,392 850,065 Marketing and Business Development 530,901 576,263 Information Processing & Communications 315,943 330,053 Professional Fees 349,484 361,409 Premises and Equipment 80,394 79,442 Other Expense 293,683 280,982 Total Other Expense 2,415,797 2,478,214 Income (Loss) Before Income Taxes (1) 1,657,605 1,525,713 Tax Expense 594,692 561,514 Income From Continuing Operations (1) 1,062,913 964,199 Discontinued Operations, Net of Tax (2, 3) (135,163 ) (375,569 ) Net Income (Loss) (1, 2, 3) $927,750 $588,630 Effective Tax Rate From Continuing Operations 35.9 % 36.8 % Balance Sheet Statistics (4) Total Assets $39,892,382 $33,449,702 Total Equity $5,924,044 $5,599,422 Total Tangible Equity $5,465,304 $5,284,232 Tangible Equity/Total Owned Assets 13.7 % 15.8 % ROE (1, 2, 3) 16 % 10 % ROE from Continuing Operations (1) 18 % 17 % Allowance for Loan Loss (period end) $1,374,585 $759,925 Change in Loan Loss Reserves $614,660 $56,009 Reserve Rate 5.45 % 3.65 % Interest-only Strip Receivable (period end) $300,120 $400,313 Net Revaluation of Retained Interests ($119,324 ) $51,346 Per Share Statistics Basic EPS (1, 2, 3) $1.94 $1.23 Basic EPS from Continuing Operations (1) $2.22 $2.02 Diluted EPS (1, 2, 3) $1.92 $1.23 Diluted EPS from Continuing Operations (1) $2.20 $2.01 Stock Price (period end) $10.23 $17.37 Book Value $12.34 $11.72 Ending Shares Outstanding (000's) 479,987 477,688 Weighted Average Shares Outstanding (000's) 479,335 477,328 Weighted Average Shares Outstanding (fully diluted) (000's) 483,470 478,879 Loan Receivables (4) Total Loans - Owned $25,216,611 $20,831,117 Average Total Loans - Owned $21,348,493 $19,947,784 Interest Yield 10.89 % 10.73 % Net Principal Charge-off Rate 4.59 % 3.40 % Delinquency Rate (over 30 days) 4.35 % 3.26 % Delinquency Rate (over 90 days) 2.06 % 1.51 % Transactions Processed on Networks (000's) Discover Network 1,515,368 1,486,366 PULSE Network 2,682,312 2,285,061 Total 4,197,680 3,771,427 Volume PULSE Network $106,012,108 $86,236,408 Third-Party Issuers 6,398,579 5,480,105 Diners Club International (5) 12,695,030 - Total Third-Party Payments 125,105,717 91,716,513 Discover Network - Proprietary (6) 95,688,443 93,794,500 Total $220,794,160 $185,511,013

(1) The quarter ended November 30, 2008 includes proceeds of $863 million pre-tax (estimated $535 million after-tax) related to the antitrust settlement. (2 )The quarter ended May 31, 2008 includes income from discontinued operations, net of tax of $32.6 million consisting of a $21 million gain related to disposition of the Goldfish business and income of $12 million related to the Goldfish business operations. The quarter ended February 29, 2008 includes a loss from discontinued operations, net of tax of $158 million consisting of a $172 million loss related to reflecting the Goldfish business as held for sale and income of $14 million related to the Goldfish business operations. (3) The quarter ended November 30, 2007 includes a $391 million pre-tax ($279 million after-tax) non-cash impairment charge related to the company's Goldfish business. (4) Based on Continuing Operations except equity and ROE. Equity is based on company's equity. (5) 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. (6) Gross proprietary sales volume on the Discover Network.

Discover Financial Services Managed Basis (1) (unaudited, dollars in thousands) Year Ended Nov 30, 2008 Nov 30, 2007 Earnings Summary Interest Income $6,545,829 $6,378,674 Interest Expense 2,356,919 2,741,128 Net Interest Income 4,188,910 3,637,546 Other Income (2) 2,953,096 2,219,776 Revenue Net of Interest Expense 7,142,006 5,857,322 Provision for Loan Losses 3,068,604 1,853,395 Employee Compensation and Benefits 845,392 850,065 Marketing and Business Development 530,901 576,263 Information Processing & Communications 315,943 330,053 Professional Fees 349,484 361,409 Premises and Equipment 80,394 79,442 Other Expense 293,683 280,982 Total Other Expense 2,415,797 2,478,214 Income (Loss) Before Income Taxes (2) 1,657,605 1,525,713 Tax Expense 594,692 561,514 Income From Continuing Operations (2) 1,062,913 964,199 Discontinued Operations, Net of Tax( 2, 3, 4) (135,163 ) (375,569 ) Net Income (Loss) (2, 3, 4) $927,750 $588,630 Balance Sheet Statistics (5) Total Assets $65,620,476 $60,591,475 Total Equity (6) $5,924,044 $5,599,422 Total Tangible Equity (6) $5,465,304 $5,284,232 Tangible Equity/Net Managed Receivables 11.0 % 11.1 % Tangible Equity/Total Managed Assets 8.3 % 8.7 % Net Yield on Loan Receivables 8.55 % 7.75 % Return on Loan Receivables (2) 2.17 % 2.06 % Loan Receivables (5) Total Loans - Managed $51,095,278 $48,180,436 Average Total Loans - Managed $49,011,148 $46,913,474 Managed Interest Yield 12.61 % 12.65 % Managed Net Principal Charge-off Rate 5.01 % 3.83 % Managed Delinquency Rate (over 30 days) 4.56 % 3.58 % Managed Delinquency Rate (over 90 days) 2.17 % 1.67 % Credit Card Volume $105,734,055 $106,620,818 Credit Card Sales Volume $92,239,779 $90,262,556 Segment - Income Before Income Taxes U.S. Card $1,576,194 $1,488,753 Third-Party Payments 81,411 36,960 Total $1,657,605 $1,525,713

(1 )Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule. (2) The quarter ended November 30, 2008 includes proceeds of $863 million pre-tax (estimated $535 million after-tax) related to the antitrust settlement. (3 )The quarter ended May 31, 2008 includes income from discontinued operations, net of tax of $32.6 million consisting of a $21 million gain related to disposition of the Goldfish business and income of $12 million related to the Goldfish business operations. The quarter ended February 29, 2008 includes a loss from discontinued operations, net of tax of $158 million consisting of a $172 million loss related to reflecting the Goldfish business as held for sale and income of $14 million related to the Goldfish business operations. (4 )The quarter ended November 30, 2007 includes a $391 million pre-tax ($279 million after-tax) non-cash impairment charge related to the company's Goldfish business. (5) Based on Continuing Operations. Equity is based on company's equity. (6) Balance on a GAAP and Managed basis is the same.

Discover Financial Services U.S. Card Segment Managed Basis(1) (unaudited, dollars in thousands) Year Ended Nov 30, 2008 Nov 30, 2007 Earnings Summary Interest Income $6,542,664 $6,376,298 Interest Expense 2,356,836 2,741,109 Net Interest Income 4,185,828 3,635,189 Other Income (2) 2,773,896 2,101,076 Revenue Net of Interest Expense 6,959,724 5,736,265 Provision for Loan Losses 3,068,604 1,853,395 Total Other Expense 2,314,926 2,394,117 Income (Loss) Before Income Taxes (2) $1,576,194 $1,488,753 Net Yield on Loan Receivables 8.54 % 7.75 % Pretax Return on Loan Receivables (2) 3.22 % 3.17 % Loan Receivables Total Loans $51,095,278 $48,180,436 Average Total Loans $49,011,148 $46,913,474 Managed Interest Yield 12.61 % 12.65 % Managed Net Principal Charge-off Rate 5.01 % 3.83 % Managed Delinquency Rate (over 30 days) 4.56 % 3.58 % Managed Delinquency Rate (over 90 days) 2.17 % 1.67 % Credit Card Loans Credit Card Loans - Managed $49,692,974 $47,929,242 Average Credit Card Loans - Managed $48,229,519 $46,811,570 Managed Interest Yield 12.65 % 12.66 % Managed Net Principal Charge-off Rate 5.07 % 3.84 % Managed Delinquency Rate (over 30 days) 4.66 % 3.59 % Managed Delinquency Rate (over 90 days) 2.22 % 1.68 % Total Credit Card Volume $105,734,055 $106,620,818 Sales Volume $92,239,779 $90,262,556

(1 )Managed basis assumes loans that have been securitized were not sold and presents earnings and statistical information on these loans in a manner similar to the way loans that have not been sold are presented. See Reconciliation of GAAP to Managed Data schedule. (2) The quarter ended November 30, 2008 includes proceeds of $863 million pre-tax related to the antitrust settlement.

Discover Financial Services Third-Party Payments Segment (unaudited, dollars in thousands) Year Ended Nov 30, 2008 Nov 30, 2007 Earnings Summary Interest Income $3,165 $2,376 Interest Expense 83 19 Net Interest Income 3,082 2,357 Other Income 179,200 118,700 Revenue Net of Interest Expense 182,282 121,057 Provision for Loan Losses - - Total Other Expense 100,871 84,097 Income (Loss) Before Income Taxes $81,411 $36,960 Volume PULSE Network $106,012,108 $86,236,408 Third-Party Issuers 6,398,579 5,480,105 Diners Club International (1) 12,695,030 - Total Third-Party Payments $125,105,717 $91,716,513 Transactions Processed on PULSE Network (000's) 2,682,312 2,285,061

(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.

Discover Financial Services Reconciliation of GAAP to Managed Data (1) (unaudited, dollars in thousands) Year Ended Nov 30, 2008 Nov 30, 2007 Interest Income GAAP Basis $2,692,563 $2,584,402 Securitization Adjustments (1) 3,853,266 3,794,272 Managed Basis $6,545,829 $6,378,674 Interest Expense GAAP Basis $1,288,004 $1,223,270 Securitization Adjustments 1,068,915 1,517,858 Managed Basis $2,356,919 $2,741,128 Net Interest Income GAAP Basis $1,404,559 $1,361,132 Securitization Adjustments 2,784,351 2,276,414 Managed Basis $4,188,910 $3,637,546 Other Income GAAP Basis $4,264,458 $3,376,682 Securitization Adjustments (1,311,362 ) (1,156,906 ) Managed Basis $2,953,096 $2,219,776 Revenue Net of Interest Expense GAAP Basis $5,669,017 $4,737,814 Securitization Adjustments 1,472,989 1,119,508 Managed Basis $7,142,006 $5,857,322 Provision for Loan Losses GAAP Basis $1,595,615 $733,887 Securitization Adjustments 1,472,989 1,119,508 Managed Basis $3,068,604 $1,853,395 Total Assets GAAP Basis $39,892,382 $33,449,702 Securitization Adjustments 25,728,094 27,141,773 Managed Basis $65,620,476 $60,591,475 Tangible Equity/Total Assets GAAP Basis 13.7 % 15.8 % Securitization Adjustments 21.2 % 19.5 % Managed Basis 8.3 % 8.7 % Loan Receivables Total Loans GAAP Basis $25,216,611 $20,831,117 Securitization Adjustments 25,878,667 27,349,319 Managed Basis $51,095,278 $48,180,436 Average Total Loans GAAP Basis $21,348,493 $19,947,784 Securitization Adjustments 27,662,655 26,965,690 Managed Basis $49,011,148 $46,913,474 Interest Yield GAAP Basis 10.89 % 10.73 % Securitization Adjustments 13.93 % 14.07 % Managed Basis 12.61 % 12.65 % Net Principal Charge-off Rate GAAP Basis 4.59 % 3.40 % Securitization Adjustments 5.32 % 4.15 % Managed Basis 5.01 % 3.83 % Delinquency Rate (over 30 days) GAAP Basis 4.35 % 3.26 % Securitization Adjustments 4.77 % 3.82 % Managed Basis 4.56 % 3.58 % Delinquency Rate (over 90 days) GAAP Basis 2.06 % 1.51 % Securitization Adjustments 2.27 % 1.79 % Managed Basis 2.17 % 1.67 % Credit Card Loans Credit Card Loans GAAP Basis $23,814,307 $20,579,923 Securitization Adjustments 25,878,667 27,349,319 Managed Basis $49,692,974 $47,929,242 Average Credit Card Loans GAAP Basis $20,566,864 $19,845,880 Securitization Adjustments 27,662,655 26,965,690 Managed Basis $48,229,519 $46,811,570 Interest Yield GAAP Basis 10.92 % 10.75 % Securitization Adjustments 13.93 % 14.07 % Managed Basis 12.65 % 12.66 % Net Principal Charge-off Rate GAAP Basis 4.73 % 3.41 % Securitization Adjustments 5.32 % 4.15 % Managed Basis 5.07 % 3.84 % Delinquency Rate (over 30 days) GAAP Basis 4.55 % 3.28 % Securitization Adjustments 4.77 % 3.82 % Managed Basis 4.66 % 3.59 % Delinquency Rate (over 90 days) GAAP Basis 2.16 % 1.53 % Securitization Adjustments 2.27 % 1.79 % Managed Basis 2.22 % 1.68 %

(1 )Securitization Adjustments present the effect of loan securitization by recharacterizing as securitization income the portions of the following items that relate to the securitized loans: interest income, interest expense, provision for loan losses, discount and interchange revenue and loan fee revenues. Securitization income is reported in other income. The data is presented on both a "managed" loan basis and as reported under generally accepted accounting principles ("owned" loan basis). Managed loan data assume that the company's securitized loan receivables have not been sold and presents the results of securitized loan receivables in the same manner as the company's owned loans. The company operates its business and analyzes its financial performance on a managed basis. Accordingly, underwriting and servicing standards are comparable for both owned and securitized loans. The company believes that managed loan information is useful to investors because it provides information regarding the quality of loan origination and credit performance of the entire managed portfolio and allows investors to understand the related credit risks inherent in owned loans and retained interests in securitizations. Managed loan data is also relevant because the company services the securitized and owned loans, and the related accounts, in the same manner without regard to ownership of the loans. In addition, investors often request information on a managed basis which provides a more meaningful comparison to industry competitors.

SOURCE: Discover Financial Services

Discover Financial Services Investors: Craig Streem, 224-405-3575 craigstreem@discover.com Media: Leslie Sutton, 224-405-3965 lesliesutton@discover.com