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DFS

DFS. Presentation By: Katelyn Howard. Overview: Discover Financial Services . Issues credit cards and acquires transactions Operates a closed-loop credit card network and also uses third parties to issue its cards

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DFS

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  1. DFS Presentation By: Katelyn Howard

  2. Overview: Discover Financial Services • Issues credit cards and acquires transactions • Operates a closed-loop credit card network and also uses third parties to issue its cards • Extends card loans (receivables) to cardholders who wish to borrow through their credit cards • Owns Diners International, a global credit card network • Products: • Credit cards • Small business cards • Student Loans

  3. Key Factors • Price: $25.20 • 52 Week Range: $16.12 - $27.92 • Qualitative Risk Assessment: Low • Morningstar: 4-star rating • Market Cap: $13.216B • Dividend rate: $0.24 • Fair Value: $30.00 • P/E: 8.58

  4. Compare to the Industry

  5. 1 Yr. Graph

  6. Analysts Report (Financials) • Reported third-quarter net income of $642 million • $1.18 per share • more than double the profits reported in the prior-year quarter • Total net revenue up 5% from last year • Card networks continue to be a growth engine for company • Volume growth in the third-party issuer segment accelerated to 11% from 7% in the previous quarter

  7. Company News • Expanding into mortgages and student loans • Investing in such things, caused higher expenses • Card sales volume was an all-time record of $26.3 billion in the quarter, up 9% from the prior year • Total loans grew 8% from the prior year to $54.1 billion and were up 3% from the prior quarter • Repurchased 8.4 million shares in the third quarter for $198 million • Bought $2.5 billion of private student loans from Citigroup Inc. to expand business • Expected to add $0.07 per share to 2012 earnings

  8. 1 Yr. Compared to Peers

  9. “Good Company” • Everyday Giveaway Sweepstakes promotion • Every purchase made on a Discover card is automatically entered for a chance to win one of 150 daily prizes and a monthly prize of $25,000 • Discover will match with a $25,000 donation to a public school of the winner’s choosing • A grand prize of $1 million will be awarded at the end of the year.

  10. Analyst’s Recommendation • Total Number of Analysts: 13 • Buy:9 • Outperform:1 • Hold:4 • Underperform:0 • Sell:0

  11. Recommendations • BUY • Had a strong third quarter • P/E, P/S, 3 yr. Revenue growth, Net Profit, ROE, and D/E are better than the industry • 5 yr. growth forecast: 11.8% • Holiday season coming up • More people using their credit cards • Expansion into mortgages and student loans

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