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William Blair 37th Annual Growth Stock Conference

David Nelms

Chairman & Chief Executive Officer

June 15, 2017

©2017 DISCOVER FINANCIAL SERVICES

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Notice

The following slides are part of a presentation by Discover Financial Services (the "Company") and are intended to be viewed as part of that

presentation. No representation is made that the information in these slides is complete. This presentation is available on the Company’s website

(www.discover.com) and the SEC’s website (www.sec.gov).

Throughout these materials, direct-to-consumer deposits are referred to as DTC deposits or direct deposits. DTC, or direct, deposits are deposit

products that we offer to customers through direct marketing, internet origination and affinity relationships. DTC, or direct, deposits include

certificates of deposits, money market accounts, online savings and checking accounts, and IRA certificates of deposit.

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 quarter ended 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.

We own or have rights to use the trademarks, trade names and service marks that we use in conjunction with the operation of our business,

including, but not limited to: Discover®, PULSE®, Cashback Bonus®, Discover Cashback Checking®, Discover it®, Freeze ItSM, Discover®

Network and Diners Club International®. All other trademarks, trade names and service marks included in this presentation are the property of

their respective owners.

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Franchise Overview –

Positioned as the leading U.S. direct bank & payments partner

Note(s)

Balances as of March 31, 2017; pre-tax profit and volume based on the trailing four quarters ending 1Q17 (unless noted)

1. 2016 TNS’ Consumer Payment Strategies Study

2. Diners 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

Direct Banking(97% of DFS Pre-Tax Profit)

Payment Services(3% of DFS Pre-Tax Profit)

U.S. Card Issuing

• $60Bn card receivables

• $123Bn card sales volume

• Leading cash rewards program

• 1 in 4 U.S. households(1)

Deposits and Lending

• $37Bn direct-to-consumer

deposits

• Cashback checking

• $9Bn private student loans

• $7Bn personal loans

• Home equity installment loans

• $14Bn volume

• 10+ network alliances

• $139Bn volume

• 4,600+ issuers

• $29Bn volume(2)

• 90+ licensees

• 185+ countries / territories

Network Partners

Be the leading direct bank and payments partner

Franchise Overview –

Vision, strategic objectives and goal

Vision

Create long-term shareholder value

Goal

Focus areas and strategic objectives

Invest for the future

• Build awareness and consideration

• Enhance capabilities and operating model

Achieve profitable, disciplined growth

• Excel at serving our customers; simple,

secure experience with deep relationships

• Offer differentiated products

• Leverage payments network

Manage risk prudently

4

5

$0.6

$2.4

2007 20162007 2016

Credit Debit

2007 20162007 2016

Card Non-Card

Franchise Overview –

Business model has expanded and diversified

Loans Funding Network Volume

Other

ABS

Brokered

Direct

Deposits

Note(s)1. 2007 data is as of fiscal year ending November 30, 20072. Includes Network Partners volume

Net Income

(All data in billions)

$53

$77

$54

$77

$186

$307

(2)

(1) (1) (1) (1)

6

9.68%0.14%

0.15% 0.02% 9.99%

2015 Change in marketrates

Portfolio mix andother

Interest charge-offs

2016

Net Interest Margin –

Asset sensitivity helped drive NIM expansion in 2016

Net Interest Margin

2017 NIM guidance: slightly higher than 2016The benefit of incremental increases in the prime rate will be partially offset by higher:

• Wholesale funding costs

• Balance transfer and promotional balances

• Deposit betas

• Interest charge-offs

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Payments –

Leverage payments assets to support card issuing

Merchant funded rewards

Emerging technologies

Flexibility and control

Brand recognition

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Card –

Proprietary network helps drive brand recognition

64

5653 53

29 29

19

13

6

V MA DFS AXP COF JPM C BAC WFC

Source: 2016 Millward Brown Brand Tracking Study

Average Unaided Card Brand Awareness

9

-2%

0%

2%

4%

6%

8%

1Q14 1Q15 1Q16 1Q17

DFS Industry

Card –

Loan growth has been consistent and profitable

Source: Company filings. Industry includes AXP, BAC, C, COF, JPM, SYF, WFC.

Note(s)1. Standard deviation of quarterly loan growth

Growth STDEV Avg ROE

DFS 1.3% 21%

Industry 2.5% 9%

(1)

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Card –

Recognized leader in customer satisfaction and loyalty

Note(s)

1. “Recommend to a Friend” is the percentage of survey participants who strongly / somewhat agree with the statement “I would recommend to a friend” among cardholders

who say they use that brand’s card most often to make purchases

2. “Consideration” is the percentage of survey participants saying either “it would be my first choice” or “I would seriously consider it” among general population

Brand Strength Customer Satisfaction

Source: 2016 Brand Health Tracker Study, Millward Brown

American Express

Bank of America

Capital One

Chase

Citibank

Wells Fargo

Discover

Reco

mm

en

d t

o a

Fri

en

d(1

)

Consideration(2)

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Card –

Digital driving customer experience and efficiencies

Applications:

Website

Mobile

Digital Payments

Mobile Logins

47%

40%

64%

50%

Balance Transfer

Offers

Single Sign On

Portal

Mobile Experiences 2016 Digital Efficiency Metrics

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Card –

One’s view on credit depends on one's perspective

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17

Card Net Charge-off (NCO) Rate

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0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

AXP BAC DFS JPM C WFC COF SYF

1Q17 NCO Rate

Card –

Net charge-off rate remains among the lowest in the industry

Source: Company filings

Note(s)1. U.S. Consumer Services card member loans2. U.S. Card 3. Credit card 4. North America Citi-Branded Cards5. Domestic Card6. Total company

(1) (2) (4) (5) (6)(3) (3) (3)

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Card –

Charge-off drivers(1)

Seasonality

Seasoning Normalization (Mean Reversion)

Macroeconomic fundamentals

NC

Os

NC

Os

Through-the-cycle average

Time

TimeRecession

1 2 30

NC

Os

Years from

Origination

4

Q1 Q2 Q3 Q4

NC

Os

Note(s)1. Illustrative depictions; graphs do not represent actual data

15

0%

2%

4%

6%

8%

10%

12%

0%

1%

2%

3%

4%

5%

6%

7%

1Q85 1Q89 1Q93 1Q97 1Q01 1Q05 1Q09 1Q13

U.S. Consumer NCO Rate and Unemployment Rate

Card –

Recessions trigger cyclical consumer credit inflections

Consumer NCO Rate (LHS)

Unemployment Rate (RHS)

Economic recessionSource: Federal Reserve, BLS, NBER

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300

350

400

4Q07 4Q09 4Q11 4Q13 4Q15

3%

4%

5%

6%

7%

8%

9%

10%

11%

Apr-07 Apr-09 Apr-11 Apr-13 Apr-15

4.5%

5.0%

5.5%

6.0%

6.5%

1Q07 1Q09 1Q11 1Q13 1Q15

200

300

400

500

600

700

Apr-07 Apr-09 Apr-11 Apr-13 Apr-15 Apr-17

Card –

Consumer credit fundamentals remain favorable

Initial Jobless Claims Unemployment Rate

Home Prices Debt to Disposable Income Ratio

Source: DOL, BLS, FHFA, Federal Reserve

Ind

ex, 1Q

80=

100

Th

ou

san

ds

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Private Student Loans –

Discover is one of the largest private student lenders

Overview

• Not-for-profit schools with 4-year

undergraduate or graduate degree

programs, bar and residency loans

- 99 of top 100 national

universities(1)

- 50 of top 50 medical, law and

graduate business schools(1)

• Cosigner rate of ~90% on originations

• Average FICO > 750 at acquisition(2)

• School certification and direct

disbursement to school for all

graduate and undergraduate

borrowers

Note(s)

1. Placement of Discover brand at schools that use a lender list; rankings based on 2017 U.S. News and World Report

2. The higher of the borrower or the co-signer at origination on the organic portfolio

3. Includes CitiAssist branded originated loans for 2012

$6.4

$2.6

$7.8$8.1

$8.5$8.8 $9.0

-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

0.0%

0.5%

1.0%

1.5%

2.0%

2012 2013 2014 2015 2016

Purchased Portfolios Organic

Total NCO rate

Loans ($Bn)

’12-’16

CAGR

-14%

’12-’16

CAGR

20%

(3)

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$3.3

$4.2

$5.0

$5.5

$6.5

-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

0%

1%

2%

3%

4%

2012 2013 2014 2015 2016

Total Loans Outstanding

6-month Lagged Charge-off Rate

Personal Loans –

Driving disciplined, profitable growth

Overview Loans ($Bn)

• Superior alternative for

consolidating debt

• Typical installment loan

characteristics:

– 3- to 7-year term

‒ Up to $35,000

‒ Average portfolio FICO of 745

• Two-thirds of borrowers have a

Discover credit card

2012-2016

18% CAGR

(1)

Note(s)

1. An example calculation of 6-month Lagged Charge-off Rate: net principal charge-offs for the 12 months ending December 31, 2016 divided by average loan balance of the 12

months ending June 30, 2016

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Direct-to-Consumer Deposits (DTC) –

Funding asset growth with high quality deposits

DTC Deposits ($Bn)

DTC Balances

by Life of Relationship

$28

$36

2012 2016

16%

53%

45%

16%

39%31%

2012 2016

4+ Years 2 - 4 Years < 2 years

20

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

DFS 5Yr Swap

Direct-to-Consumer Deposits –

Low deposit betas have contributed to asset sensitivitySavings 12M CD

60M CD Deposit Betas

0.0%

0.4%

0.8%

1.2%

1.6%

DFS Fed Funds Target

0.0%

0.4%

0.8%

1.2%

1.6%

DFS Fed Funds Target

• Deposit betas were essentially zero

through the first two Fed rate hikes

• Direct banks began to raise deposit rates

after the March 2016 rate hike, though

deposit betas remain below long-term

averages

Note(s)

1. Direct peer represents the median of: ALLY, AXP, BCS, CIT, COF, EVER,

GS, Nationwide, SLM, SYF, USAA

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13.4%

1Q17

Capital –

Strong capital levels allow for significant capital returns

Note(s)1. 2016 common dividends plus gross share repurchases divided by market capitalization at 12/31/152. Common Equity Tier 1 Capital Ratio (Basel III Transition)

DFS Common Equity Tier 1 Ratio(2)

10% - 11%

2016 Total Yield(1)

Source Public Company Disclosures

Expected

Target

11.8%

10.4%

8.2%

7.0%6.6%

4.4%

COF DFS AXP C JPM BAC

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