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Executives

Craig Streem – VP, IR

David Nelms – Chairman and CEO

Roy Guthrie – EVP and CFO

Analysts

Bill Carcache – Fox-Pitt

David Hochstim – Buckingham Research Group

Andrew Wessel – JP Morgan

Craig Maurer – CLSA

Jason Arnold – RBC Capital Markets

Don Fandetti – Citi

Brian Foran – Goldman Sachs

Chris Brendler – Stifel, Nicolaus

Sanjay Sakhrani – KBW

Rick Shane – Jefferies

Brad Ball [ph] – Ladenburg FSG

John Stilmar – SunTrust

Henry Coffey – Sterne, Agee

Scott Valentin – FBR

Eric Wasserstrom – Galleon Group

Discover Financial Services (DFS) F3Q09 (Qtr End 08/31/09) Earnings Call Transcript September 17, 2009 11:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2009 Discover Financial Services earnings conference call. My name is Michella, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Mr. Craig Streem, Vice President, Investor Relations. Please proceed.

Craig Streem

Thank you very much, Michella. Good morning, everybody, and welcome all of you to this morning’s call and we certainly appreciate your joining us today. I need to begin by reminding everyone that the discussion today contains certain forward-looking statements about the company’s future financial performance and business prospects, which are of course subject to risks and uncertainties and speak only as of today.

Factors that could cause actual results to differ materially from these forward-looking statements are set forth within today’s earnings press release, which was furnished to the SEC in an 8-K report, in our Form 10-Q for the quarters ended February 28, 2009 and May 31, 2009, and in our Form 10-K for the year ended November 30, 2008, all of which are on file with the SEC.

In the third quarter earnings release and supplement, which are now posted on our website at discoverfinancial.com and have also been furnished to the SEC, we have provided information that compares and reconciles the company’s managed basis financial measures with the GAAP financial information and we explained why these presentations are useful to management and to investors. And we urge you to review that information in conjunction with today’s discussion.

Our call this morning will include formal remarks from David Nelms, our Chief Executive Officer, and Roy Guthrie, our Chief Financial Officer, and of course, a question-and-answer session at the end.

Now it’s my pleasure to turn the call over to David.

David Nelms

Thanks, Craig. Given the adverse credit environment, I feel great about our results this quarter. We achieved very strong revenues and had the lowest expenses we’ve had in many years. Our results this quarter reflect the significant progress we have made against the performance priorities we laid out at the beginning of the year at our investor conference. So, with nine months of the year behind us, I thought we would begin with a look-back at those priorities and review our progress.

The first priority we set for ourselves was to achieve superior credit performance versus competitors. Our third quarter managed net charge-off ratio of 8.39% reflected the challenging environment. However, recently published securitization data and competitor guidance suggest that once again in the third quarter we expect to have the lowest charge rate among our major competitors. We have built a loyal, prime customer base focused on rewards, and that has allowed us to outperform the industry in this adverse credit cycle.

We have seen some promising trends in certain economic indicators such as fewer job losses and higher new sales and consumer confidence. But unemployment and bankruptcy rates continue to rise. So we do remain cautious about the outlet for delinquencies and loan losses. Although loan losses in the third quarter came in a bit better than we expected, we believe that we have not still not quite reached peak loan losses and we projected the managed net charge-off rate in the fourth quarter will be in the range of 8.5% to 9.0%.

The next priority we set for ourselves was conservative loan growth. At the end of the third quarter, we had total managed loans of $51 billion, essentially unchanged from the previous quarter and up 1% from last year. Our card portfolio was lower by 2% year-over-year, reflecting our decision to dramatically reduce promotional rate balance transfer activity during the quarter. In fact, during the quarter, our balance transfer activity was down 84% from last year, and we expect to continue at low levels of balance transfer originations in the fourth quarter.

While our card portfolio was down slightly during the quarter, our Discover Student Loan portfolio grew very nicely, given that the summer is a peak funding period for this product, and we had very strong demand. I feel very good about the credit quality of the student loans we are putting on the books. Of the new dispersements [ph], approximately 80% was government-guaranteed; and of the private loans, 80% had co-signers.

Our other priorities this year included achieving higher net interest margin and revenues, reducing expenses, and maintaining a rigorous focus on capital, liquidity and funding. Roy will take you through the specifics of these items, but if you look at our results, I think you will agree that the team has done a great job this year in all of these critical areas.

The investment community continues to ask about the impact of the Card Act, focusing especially on how net interest margin will be affected. First off, we are coming into the period of changes with a very healthy net interest margin, which came in at 9.9% during the third quarter. One reason for our margin expansion is our significant pullback on balance transfer activity, which contributed to a 25% decline in the quarter in our low rate promo balances. Margins also expanded, as we unwound risk-based pricing by eliminating our lowest rate APRs in light of the fact that the Card Act will no longer allow repricing of customers would become riskier in the future.

Another critical step in managing yield was fixing our standard retail APRs to the prime rate, which will help us maintain more consistent net interest margins in various funding environments in the future. I’m also pleased with our progress in shifting our emphasis to originating student loans versus student credit cards and to originating personal loans for debt consolidation and debt pay-down versus credit card balance transfers. Given the current economic environment and the needs of consumers today, I believe these shifts are good for our customers and for shareholders.

We believe some of the immediate consequences of the Card Act include far less industry focus on low initial APRs and on promo rates. Instead, overall long-term value will again become the important differentiating factor in marketing. I believe Discover is well positioned to capitalize on that shift by focusing on our core strengths; our brand, Cashback Bonus, unique product features, and our superior service.

Research shows that most consumers want rewards on their credit cards, and 82% of them prefer cash over miles or points. Furthermore, the studies show that Discover has three times more household ownership of cash rewards cards than our next closest competitor.

We have just launched new advertising that reinforces our leadership and heritage of cash rewards, enabling cardmembers to make their money worth more. A Pace [ph] to Discover has returned as our tagline because it is distinctive, well-recognized, and helps to reinforce our brand. Our new commercials, with which we will be much more prominent in the fourth quarter, also show customers using their cards across a variety of merchant categories, which helps reinforce our expanding acceptance.

In terms of card sales volume, this quarter results reflect the decline of 7% year-over-year, primarily reflecting significantly lower gas prices and a slower economy, offset by the benefit of growing merchant acceptance. Our number of active merchants at the end of the quarter actually increased by more than 5% from last year. Despite this progress, we acknowledge there are still some small merchants that do not accept our card and signing them remains one of our highest priorities and opportunities.

In addition, we continue to work to enhance acceptance awareness among merchants, their employees, and our customers. Not only are we focusing on US merchant acceptance, we are also continuing with our plan to expand acceptance globally. In July, PULSE became the global ATM network for Diners Club International cards. To further expand merchant acceptance in Western Europe and India, we have signed acquiring deals with SIX Multipay and Venture Infotek. In October, inbound [ph] Diners Club International volume in the US will begin to shift to the Discover network.

We are also making progress turning on international acceptance for Discover Card members, and by the end of 2009, we expect that merchants in over 50 countries will be enabled to accept Discover Cards. The Discover brand gives us a lot of power that we are leveraging to build our direct-to-consumer deposit business, which has the added benefit of providing stable funding for our card business and enhances our relationships with our customers.

In the third quarter, our direct-to-consumer and affinity deposits program generated over $2 billion in incremental deposits, bringing the total to over $10 billion at quarter-end. We continue to focus on new product introductions and service enhancements to attract new deposits. This year we rolled out our CD IRA product nationwide, introduced an online savings account, and launched our no withdrawal penalty for job loss feature on 12-month CDs. In the servicing arena, we launched 24/7 live customer service in March, followed certainly thereafter by the introduction of a new Discover Bank website.

So, as I wrap up, we had very strong results this quarter driven by better than expected credit performance; our return to the asset-backed market, which resulted in some release of reserves; expansion of our net interest margin; further reductions in operating expenses; and the third payment in our anti-trust settlement with Visa.

Roy will go through the numbers in detail, but I feel very good that in the most difficult environment for our industry that I could imagine, Discover continues to perform well.

Roy Guthrie

Okay, David. In my comments this morning, I’m going to amplify on a few of the things you heard from David and then give you an update on our funding, liquidity and the capital position of the company at the end of the quarter.

So, focusing on the company overall, we reported net income of $577 million, or $1.07 per share, up $0.70 from a year ago. And by my eye, this is a very solid quarter, which brings us positive for the year, even excluding the summer revenues that we’ve recorded in each of the last three quarters.

Turning to the segments, the US Card earned $913 million pretax this quarter, which does include the anti-trust litigation revenue of $472 million. I’ll begin with the managed net interest margin. And in the third quarter, as you heard David say, it was 9.9%, up 64 basis points sequentially and 95 basis points year-over-year. And clearly spread income remains a real bright spot for us, nominally up $78 million sequentially and $168 million year-over-year. This increase reflects a lower cost of funds as well as the impact of fewer low APR standard balances and a reduction in low APR promotional balances. This has led to the managed interest yield of 12.73% for the quarter, essentially flat there to a year ago and up 54 basis points sequential quarter.

Interest expressed as a percentage of managed receivables was right at 3% for the quarter, 16 basis points lower than last quarter principally due to that FDIC special assessment that we recorded last quarter and better than a year ago by 127 basis points due principally to lower LIBOR but also due to the fact that newly issued deposits now are priced lower than maturities.

Other income included revenue of $472 million from the Visa anti-trust litigation settlement as well as a $69 million favorable revaluation of our IO asset. Our fourth quarter should also include the final payment from the Visa settlement, a heads-up on that. The upward revaluation of IO principal asset here reflects our higher yield. In the first two quarters of this year, you saw this asset being written down. So directionally, this is a reversal; first quarter $98 million and in the last quarter $93 million. So that reflects positively on where we see the revenue of the company.

Moving to credit performance, the managed 30-day delinquency ratio was 5.10%, up 2 basis points sequentially. Managed net charge-offs came in at 8.39%, a sequential increase of 60 basis points, clearly a more modest increase compared to the 131 basis point increase from the first quarter to the second quarter. And given our fourth quarter guidance, we are indicating that we expect to see this deceleration continue into the fourth quarter.

As I discuss the loss provision, the reserve activity, I want to note that we have introduced a new measure for our reserve rate calculation that excludes the guaranteed portion of student loan receivables because they are guaranteed by the government and carry virtually no reserve for loss. We’ve provided this reserve rate, excluding the guaranteed loan aspects of our portfolio, in the statistical supplement under the Managed page for your information.

So during the quarter, we recorded provisions of $154 million less than charge-offs. Our reserves declined as we had a lower level of owned basis loans outstanding, driven principally by securitizations, partially offset by a higher reserve rate on the portfolio. ABS activity for this quarter includes a $1.5 billion TALF transaction, $1.6 million in retained Class D Series Notes related to the trust credit enhancement actions that we discussed with you in our last call, offset by $1.4 billion of maturing ABS. The higher reserve rate, excluding the guaranteed portion of student loans, reflects continued conservatism in our outlook based on the recent delinquency trends.

Turning to operating expense, the US Card expenses were down 16% year-over-year and came in at $490 million, 3.81% of receivables. This is the lowest quarterly operating expense ratio we have achieved at the company. Expenses reflect the reduction in force [ph] that we executed in the second quarter and continued efforts to improve the operating efficiency of the business.

Overall, expenses also reflect importantly the continued investments and our payments and direct-to-consumer deposit businesses. And as you heard David report, moving into the fourth quarter, we will begin to see some further investment in marketing. And so as a result, you should expect to see the fourth quarter spend will be up from where it was here in the third quarter.

Turning to the Payments segment, our Third-Party Payments business earned $27 million for the quarter, with total network volume up 2% to $36 billion, which includes over $6 billion from our Diners Club International transaction. Transactions processed on the PULSE network were up 6% year-over-year. However, dollar volume was down 1%, which was lower than expected.

In terms of funding, we grew total deposits by 10% year-over-year to $29 billion. David mentioned that $2 billion or 26% sequential quarter growth in our direct-to-consumer program, which together with our $1.5 billion TALF issuance essentially took care of this quarter’s funding. The $2 billion of new direct-to-consumer issuance this quarter averaged 20 to 22 months in duration, and by the third quarter, we were pricing at rates inside to the quarter. So we remain very pleased with the progress that this product line has made.

In total maturities for all sources for the remainder of 2009 are going to be about $3 billion. That includes $1.6 billion from our deposit programs and $1.3 billion from public term asset-backed yields. Looking at fiscal year 2010, we have about $17.7 billion in aggregate maturities, which we believe is well within the execution capacity of our deposit channels. But having said that, we have substantial TALF qualifying capacity at $10.2 billion, which is available to us through the end of the first quarter in 2010. And in addition to that, I think we are beginning to see some positive signs in the non-TALF ABS market.

Our contingent liquidity at the end of the quarter included over $10 billion in cash liquidity, $1.5 billion in conduit capacity, $2.4 billion in multi-year contracted revolver, and $6.4 billion in borrowing capacity at the discount window. We completed a number of capital markets transactions during the quarter.

As I said a moment ago, we did a TALF deal for $1.5 billion at one month LIBOR plus 130 over three years. We also issued equity amounting to $534 million and issued $400 million in unsecured debt. Looking to the fourth quarter, we have already completed a TALF transaction in September for $1.3 billion also at one month LIBOR plus 130 over three years.

We finished the quarter with tangible common equity of $6.8 billion, or $12.49 a share, up $1 billion from the second quarter driven by earnings and the equity rates. This was equivalent to 13.8% of managed receivables and 10.1% of tangible managed assets.

Regarding FAS 166, 167, based on expected ABS maturities between now and November 30th of this year, our current assumption is that approximately $22 billion of securitized receivables will be restored to the balance sheet on December 1, 2009, which we will reserve against. The addition of the IO strip will be reversed, and that impact along with the impact of the reserve addition will be recorded as an after-tax charge of the opening balance sheet of 2010, effective December 1, 2009.

Let me wrap up and reiterate, I think, what David closed by saying, despite what we have seen as a very difficult environment, we think we have turned in a very solid quarter while actually enhancing our already strong capital and liquidity positions.

And with that, I’m going to turn it back over to you, Michella.

Question-and-Answer Session

Operator

(Operator instructions) And your first question will come from the line of Bill Carcache with Fox-Pitt. Please proceed.

Bill Carcache – Fox-Pitt

Good morning. Can you talk a bit about operating expenses? And you mentioned higher marketing expectations in the fourth quarter. And so should we expect that number to creep back up and kind of back to maybe the levels in the first couple quarters, or any kind of guidance you can share on what we can expect for expenses as we look ahead?

Roy Guthrie

Sure, Bill. Yes, I think the -- I guess I would guide you to -- I mean, it’s -- we actually have somewhat of a seasonal low here and expect for seasonal spending to reinvigorate. Both David and I sort of referenced that. And I guide you probably not to something that would reference the run rate we saw in the first three quarters, but also not being as low as you see here in the fourth. So somewhere in between those two on the marketing line and to expect to see continued improvement across the board on everything else.

Bill Carcache – Fox-Pitt

Okay. And can you talk about your decision to stop charging over-the-limit fees and how you thought about the cost versus the benefits of continuing to charge them? Just kind of share your thought process on that?

David Nelms

Well, I would say that we felt like it would be a lot of work and not a lot of people would opt in the pay of fee. And so we felt like the simpler thing was simply to stop charging the fee.

Bill Carcache – Fox-Pitt

Okay. And finally, one more if I may. Can you talk about any differences in credit performance by geographic region, maybe any place where you are seeing delinquencies rise or notable differences in performance?

David Nelms

I would say that we are continuing to see a correlation between unemployment by area and asset price changes -- housing asset price changes by area and loan losses by area.

Bill Carcache – Fox-Pitt

Okay. Thank you very much.

Operator

And your next question will come from the line of David Hochstim with Buckingham Research Group. Please proceed.

David Hochstim – Buckingham Research Group

Thanks. Roy, I wonder if you can just clarify what we should think of as the likely dollar impact from the implementation of FAS 166 and 167, and the IO strip could be written up again then in the fourth quarter and then written off December 1st?

Roy Guthrie

Well, okay. Sure, Dave. I think the easiest way to do that is reference the $22 billion that I talked about. Let’s just stay focused on where we here without speculating on where we go. 7.45 reserve rate that we recorded in the quarter, reserves then -- that's math, tax affected and we are -- you can see our effective tax rate here is around 39%. So use about [ph] 60% of that and call that an after-tax charge associated with the reserves. The IO is sitting here at 162. So, think about that in the context -- subject to further changes is another 100 on top of that. So in $1 billion to $1.1 billion, which is kind of where we have sort of always been, and obviously that will be dynamic based on where we stand. But that’s a good proxy for it ought to be based on this quarter’s information.

David Hochstim – Buckingham Research Group

Okay. And then can you talk about the potential timing of paying back the treasury, maybe closer to that? We move forward and we have another good quarter, and the environment seems to be stabilizing.

Roy Guthrie

Well, certainly I feel -- as I stated, I feel increasingly positive and the fact that we raised equity, long-term debt during the quarter, had a strong quarter in revenues and expenses and are seeing some moderation in job loss externally, those are all very good factors. And that being said, we do have a process that we will go through with our Board and our regulators, and we have not yet reached a decision that the time is right. But I’m certainly feeling increasingly positive.

David Hochstim – Buckingham Research Group

Okay. And then finally, could you just give us some more detail on the pricing on the new private student loans originating and then also on the consolidation loans, (inaudible) what are the rates like there and what are the borrowers look like?

David Nelms

I think you can actually view some of our pricing on our website, and certainly student loans are priced lower than credit cards because they reflect much lower levels of risk. And in terms of the customers, I think we have been very, very selective. We have around 600 schools that now work with us to originate these loans, and we’ve tried to pick high-quality institutions, ensure that the money is actually used for education. And as I mentioned earlier, 80% of them have co-signers, typically parents. So I feel we’ve done this in a very careful and responsible way.

David Hochstim – Buckingham Research Group

And if (inaudible) are eliminated next year, would you continue to originate private loans do you think or --?

David Nelms

Yes. Yes, we are pretty indifferent to the proposed federal law change. Today you really have to be meeting the demand for public loans if you are going to be in the private student loan business. It’s frankly a questionable margin we make on those public loans, but you kind of have to be in it. So if they start going direct, we don’t have a big infrastructure because we are pretty new to that. And we would simply adjust.

David Hochstim – Buckingham Research Group

And just again on the consolidation loans, how do you control for credit risk because I think other lenders have had some problems with those loans and avoiding kind of being adversely selected from people who are desperate for credit --?

David Nelms

Obviously you just have to be very careful. Most of that is cross-sell business and is to our best customers. So the level of FICO score requirements and so on is higher than our credit cards. And since they come from our current customers predominantly, we’ve got long history directly with those customers. And that’s why while all customers, I’d say, are originally stressed in this environment, I think that’s why we haven’t experienced some of the same issues that have been reported by some competitors.

David Hochstim – Buckingham Research Group

Great. Thank you.

Operator

And your next question will come from the line of Andrew Wessel with JP Morgan. Please proceed.

Andrew Wessel – JP Morgan

Good afternoon. Thanks for taking the time to answer. A couple of questions, just one on net interest margin growth. If you can talk about what your kind of projecting for NIM growth assuming your deposits as you are looking out, but also I think more importantly the roll-off of that low rate promotional book, what should we be thinking about for NIM growth and going forward into the next quarter?

Roy Guthrie

Yes, I think you are absolutely right. We were continuing to replace maturing deposits at prices that are through it. So there is I think still some upside even though I think just to reinforce the fact that we are out the curve, we are not basically shortening the curve on rate alone. So it’s a good balance between liquidity and execution that’s achieving that. Again in terms of the top line, I think you are right. I think there is a lot of forces that are working on it, and clearly I think the reduction in the lower yielding promotional rate balances has to a certain extent play it out itself here in this first quarter. And there may be some of that to come, but there are also some headwinds.

I’d come back and reinforce the fact that we have sort of issued guidance here for charge-offs to rise modestly into the fourth quarter. And clearly to the extent that’s a reversal of the interest income within that measure is going to be a slight headwind to it. So I think we are constructive on where it is. We don’t necessarily think that it’s unstable where it is, but there are forces that are moving back and forth against it that could somewhat neutralize it. So I wouldn’t necessarily guide you to much higher.

David Nelms

The one thing I would add is that the initial Card Act restrictions that impact repricing on delinquent accounts went in place in August. And so we won’t see the same immediate repricing on delinquent customers that for years have had occurred. And so the lack of those immediate repricings will start to stabilize things.

Andrew Wessel – JP Morgan

Great. That’s very helpful. Thanks. And then my other question has to do with just kind of on the outlook for loan growth. As the Card Act comes into effect fully and possibly earlier, I guess based on what Barney Frank was saying yesterday, what’s your outlook for really growing assets in this environment ex of obviously increases in spending? But pretty more cards in hands and then also in terms of other lending channels, are you seeing -- obviously student loans as an area for growth can be material or is that still just kind of going to be ancillary and it’s going to be cards that really protect [ph] the challenge for asset growth?

David Nelms

I would say that we are going to continue to be pretty conservative on loan growth. I do expect some shrinkage in the industry to continue. We are making room for this plus $22 billion securitized loans to come back on our books later this year. And we are partly doing that by this big pullback on balance transfers. And we are also getting ready for the Card Act, which impacts low rate balance transfer act rates because (inaudible) to offer because of the payment allocation, which changes some of the economics there. So if anything, we do expect a modest decline in receivables by year-end. But I would say, so far this year we think our receivables have held up better than anyone else. But it’s not a time for robust growth. And we expect the increased marketing to help, but it’s not -- we are not trying to start growing fast again.

Andrew Wessel – JP Morgan

Great. And just as a follow-up to that if I could, looking out into next year, do you see the economy or -- you know, the economic outlook or really kind of increased competition in the industry from the Card Act to be the bigger determinant of card asset growth, the card loan growth through next year and going forward?

David Nelms

I think that there are a lot of factors that we are going to be considering. Certainly, continued trends in credit will be very important. How consumers react to the changes that are being put in place because of the Card Act, as you unwind risk-based pricing, some of the customers who have enjoyed their extremely low rates as that has been replaced in the last five or ten years, we will see more normal rates that used to exist in the industry. And whether they will borrow as much is an open question. And so I think there are just a lot of questions. I think we feel like we are gaining market share in credit cards, both in sales volume and in receivables. And to a large degree, what happens to the industry may dictate our growth.

Andrew Wessel – JP Morgan

Okay, great. Thank you very much.

Operator

And your next question will come from the line of Craig Maurer with CLSA. Please proceed.

Craig Maurer – CLSA

Yes, hi, good afternoon. Just a couple questions. Just so I understand it, the provisioning is much lower than I was expecting this quarter because of the securitization. So the benefit to the -- basically the benefit to the allowance, I mean, it sounds like that that’s essentially going to get reversed out, but as a one-time charge in the fourth quarter. Is that correct?

Roy Guthrie

Yes, I think it all -- that’s right. And in terms of often on because of the securitization activity, all -- there will be like a master catch-up at the end of the fourth quarter and basically everything will have a reserve against it. I think it’s important to highlight though, as you talk about this quarter, is that this has been an interesting year, Craig, and early in the year we saw receivables come back on to the balance sheet as we basically had maturities of bonds. We are now back in the market and we are seeing receivables go off of the balance sheet, as we see issuance of bonds. And I think if you sort of look at it through all three quarters, those things sort of normalize or neutralize. And that’s kind of the way I think about it in the context of the year and the fact that we are in positive territory for the year. Granted this particular quarter, we have lower owned assets with reserves against them. And that’s why we incurred the release.

Andrew Wessel – JP Morgan

Okay. Another question. The teaser rates in the balance transfers you were using in the first half of the year, would it be possible for you to tell us what your receivables growth or declines would have looked like ex the transfers? I’m just trying to get an idea because very few banks were using low rate teaser transfers during that period?

David Nelms

Well, I would actually disagree with that. I think it’s pretty common in the industry. But I do -- if at the beginning of the year our promo rate -- promo balances were somewhere around 20% of our portfolio, and I’d say by year-end, we’re expecting it somewhere around 10% of our portfolio and then continue to decline in the next year. And certainly fewer offers, but also shorter durations. Pretty much our offers today are six-month in duration, have a fee associated with them. So we are being very selective on how we offer them and you’re seeing that show up in the yield.

Andrew Wessel – JP Morgan

Okay. And one last question. Just shifting to your international discussion and acceptance, I was just curious, beyond getting acceptance up, is there any traction in terms of issuing cards outside the country right now? I just want to know how that was going. I mean, you still have Diners’ relationships outside the country for issuance, and I was just wondering how that’s competing with Visa, MasterCard and AmEx globally.

David Nelms

Well, just to be clear, we don’t directly issue any cards outside of the US today. But we --

Andrew Wessel – JP Morgan

No, but the partner relationships.

David Nelms

Absolutely. So we have nearly 50 franchisees who issue cards. And we are actively working with those franchisees to try to issue more cards and expand additional relationships. Our first priority today is probably more on acceptance and turning on more and more countries to Discover card to take advantage of the Diners Club network globally, and we will be working on that through next year. But we also have signed -- I think we’ve signed over half of our top ten customers to some new longer term contracts that haven’t (inaudible) growth. And so we are working on that. Diners Club is a very high-end T&E corporate kind of card. Think about AmEx. And so the volumes have been tough just because corporations around the world have pulled back given the economy.

Andrew Wessel – JP Morgan

But here’s what I’m trying to get. It seems that you are fighting an uphill battle. I mean, you have banks that see more value because of the global acceptance in Visa/MasterCard. So while you are trying to catch up on acceptance, they are issuing more Visa/MasterCard. My question is, what’s going to be the long-term incentive to reinvigorate Diners issuance?

David Nelms

Well, I would say our partners see more value in issuing on our network. Particularly for the corporate business, they are partners who have shifted their volume away from Visa/MasterCard onto our network because of our global acceptance, our strong interchange, and our -- the brand is something we want to reinvigorate and we’ve just started a new ad campaign that is being rolled out around the world as we speak to help reinvigorate and reinvest in the overall brand. So it’s something we are very much focused on taking advantage of the opportunity. It’s -- I view it the other way. It’s a global network and it needs a lot more volume. So we are focused on that.

Andrew Wessel – JP Morgan

Thanks.

Operator

(Operator instructions) And your next question will come from the line of Jason Arnold with RBC Capital Markets. Please proceed.

Jason Arnold – RBC Capital Markets

Hi, good morning, guys. David, you commented on this briefly, but could you offer some additional thoughts on what you are seeing in the competitive landscape, as more issuers are adapting their portfolios to the Card Act? And I guess specifically, what degree have you repriced your portfolio with regard to the Card Act? And do you believe that your repricing is more or less than peers?

David Nelms

We believe less than peers, and we have completed our mailings of term changes. So we feel that we are beyond the changes. I would say, one way or another, every customer in the portfolio has been or is being affected by Card Act. And it’s been a process really over the last two years, but we’ve now completed the process of moving virtually all of our loans to prime-based because that’s all that really works in the new -- given the new rules. And I would say what we’ve seen while -- I think we’ve had to be -- we’ve been less aggressive than some competitors generally. I’m seeing people generally move away from low intra rates or low initial rates and a much tighter band of pricing, more the way it used to work. But there are still a lot of people I think that are still adjusting to this new model since it hasn’t fully gotten the effect yet.

Jason Arnold – RBC Capital Markets

Okay, thank you. And then this one might be better for Roy. Could you offer us a little more detail on the other income line in addition to the IO revaluation? Maybe you could tell us what contributed the big sequential increase in other income. Was it some security gains or more from the securitization line?

Roy Guthrie

The other income -- well, obviously the dominant piece of the other income line is -- and particularly, Jason, when you’re looking at it year-over-year, reflects the Visa settlement proceed that resides inside that number -- sort of number one. Number one, I’d suggest you focus on it in the managed context, which is the -- behind the GAAP page in the statistical supplement, which gives you a little bit more of a pure look. That particular line also has the $69 million write-up of the IOS that I referenced in my prepared remarks.

And I think it’s important to note, as I highlighted there, is that it’s been written down in the last two quarters, reflecting I think our forward view of the environment. And now we’ve sort of written it back up. So the two big things in there that are dynamic are that settlement number 472, particularly year-over-year, sequential quarter it’s the same. But sequential quarter, in fact there is a $69 million IO write-up versus the write-down. And you can see the trend of the change in that on the first page of the statistical supplement inside that body of allowance and IO change information.

Jason Arnold – RBC Capital Markets

Okay, terrific. Thank you so much.

Operator

And your next question will come from the line of Don Fandetti with Citi. Please proceed.

Don Fandetti – Citi

Hi. David, quick question. Clearly, there is a better feel around credit. Does that give you more confidence in terms of potentially addressing sort of the longer term funding question or mix, I should say? And are you comfortable kind of running the company with the current mix and the line of the ABS market, or do you -- could you still be looking at some alternatives?

David Nelms

I am really pleased with the progress we have made on direct-to-consumer deposits. At over $10 billion, we are now one of the top-five direct banks in the country, we believe. And there is no reason we can’t continue to move up in that ranking. And I would say that our success on both the ability to grow and to do so at an attractive funding cost, given lower expenses in the direct model, if you are in the increased confidence that direct banking is the future as opposed to branch banks. And I don’t have the expenses. I don’t have the full product line you have to have with branches that bring with them in some cases returns and loan losses and risk that don’t look as attractive to me.

So, I am really focused on being the leader in direct banking, and that’s going to become an increasing part of our funding. It’s particularly displacing right now some of the broker deposits, but I think it could displace some of the asset-backed over the long period of time. I mean that market has also been important to us right now, and it’s got some good execution, but I’m feeling better than I ever have on our future funding capabilities as a company, the way [ph] we are.

Don Fandetti – Citi

Okay, thank you.

Operator

And your next question will come from the line of Brian Foran with Goldman Sachs. Please proceed.

Brian Foran – Goldman Sachs

Good afternoon, guys.

David Nelms

Hi.

Brian Foran – Goldman Sachs

I apologize I missed this earlier. But in overall credit metrics for you and the industry, I guess the only weak spot in the recent month was the 30 to 59-day bucket. And when we look at that, we’ve got seasonality. I’m assuming some of the repricings you did in the spring and the whole industry did in the spring pushed some people over edge. And then you have core -- the potential for core deterioration. Is there any color either quantitatively or qualitatively you can give on how much of the 30 to 59-day bucket acceleration is core deterioration versus these other factors?

Roy Guthrie

Well, I would not -- the pricing changes actually could be helping a bit because, as I say, it’s eliminating lower -- very low rated (inaudible) and doing less repricing on delinquent customers, for instance -- Brian?

Operator

Your next question will come from the line of Chris Brendler with Stifel, Nicolaus. Please proceed.

Chris Brendler – Stifel, Nicolaus

Hi, thanks. Good morning. Appreciate the color on the teaser rate portfolio. I think if I heard you correctly, it was 20% at year-end ’08. (inaudible) to be down to 10% at year-end ’09 and it fell 25% in the quarter. Just I guess longer term, where do you expect that to go? I think -- I was thinking the teaser rates would go away, but I’ve noticed a lot of issuers, including yourself, are still mailing them today. And just I think -- is there an opportunity to put a big teaser rate portfolio on now and then hope that you don’t see competitive activity take those balances away? Just how do you think about the use of introductory rates and where you see that going now, in the near-term, and next year when the rules change? Thanks.

David Nelms

Sure. Well, I think that teaser rates and balance transfers can still have a positive continued role even after the Card Act is in place. And there are balance transfer fees associated with them. And done right, they can add to our profits and growth. It may be that we are in single digits for a while and it may stay that way. We’ll see. But I think that generally we are likely to be doing shorter durations, higher rates than -- you're just not going to see the zeros and 1.9s [ph], the way you saw it for a while because the economics have changed. But I don’t -- I personally don’t think that we will totally be eliminating teaser rates.

Chris Brendler – Stifel, Nicolaus

Okay. And a follow-up question. It sounds like -- I wasn’t quite sure what -- how you felt about the sales volume this quarter. You sure talked about macro factors and the economy, but it doesn’t seem like we saw that across Visa and MasterCard numbers that they released this week, yet your numbers sort of decelerated sequentially. Certainly it was pretty impressive before this quarter. Anything else that caught your eyes on sales volume this quarter?

Roy Guthrie

Yes. I would not overreact to a 4% versus a 7%. I would think about those two combined because there was a difference in number of days, how holidays fell [ph]. And one of the things I look at is sort of the weekly and the adjusted volumes. And we saw a lot of consistency across Q2 and Q3. And it probably -- if you adjust it for days, 4% was probably a little favorable and 7% might be a little light, more of a decline than adjusting it. I’ve seen maybe a bit of a better last couple weeks, but it wasn’t enough to affect the quarter very much.

And I’d say if you do average those two quarters, you get 6%, 7%, which compares very favorably to the last numbers I’ve seen out of Visa and MasterCard, which on average were down about 15% for US credit card. So we think we are gaining share and hopefully the last couple of weeks’ trend will continue. It very well could because we are going to start getting to the annualized -- the (inaudible) going to start dig it a lot easier because right about now is when the crisis started.

Chris Brendler – Stifel, Nicolaus

Okay. Last question, speaking of the crisis, surprisingly a few questions on credit this quarter. I think people are feeling a lot better given the improvement we’ve seen in the last several months in delinquencies yet. I think there is still debate out there on exactly what we are seeing. I think we talked about in your last quarter’s call when you first started the decline in delinquencies and what’s driving it. Starting to pick back up, as Brian indicated in this question, how do you feel about credit right now? I mean, you still have a lot of job losses out there, portfolios have stabilized, the issuers are taking a lot of aggressive actions to stabilize those portfolios. Can you just give me a little sense of where you feel about -- how you feel about customer credit right now? Thanks.

David Nelms

I would say we remain very cautious. As you can tell from our estimate for the next quarter, we don’t think that we’ve seen the peak yet. Certainly the charge-offs are rising a lot more slowly than they did earlier in the year. But as long as the unemployment rate keeps rising and people keep losing their jobs, credit is going to continue to be a real challenge. I’d say the good news is that we are seeing a lot more mixed signs. And you need a deceleration before you actually hit a peak and then start getting out the other side.

Chris Brendler – Stifel, Nicolaus

I think -- I guess the key debate is whether the loss is peak in the fourth quarter of ’09 or they peak sometime in 2010 and continue to move higher. What do you think on that question?

David Nelms

I would be delighted if that’s were the case, but I don’t think we -- we certainly don’t know that yet. And it’s going to depend a lot on the economy. I look at the most -- the average economists think that our employment rate is not going to peak till maybe the first half of next year, and that tends to be correlated pretty heavily with credit card loan losses as well.

Chris Brendler – Stifel, Nicolaus

Appreciate it. Thank you.

Operator

And your next question will come from the line of Sanjay Sakhrani with KBW. Please proceed.

Sanjay Sakhrani – KBW

Thank you. Hey, Roy, I just had a quick question on the margin, just a continuation of the question asked earlier. If we think about the margin looking into kind of next year, I know you guys are pre-funding a lot -- some of the maturities that are going to happen next year. I mean, should we assume that there is a bias upwards looking into next year because some of that pre-funding will be used, because I saw cash increased sequentially this quarter as well?

Roy Guthrie

Sure. I think that the -- I'll give you a measure of that, but I think we do have a, I mentioned, $17 billion of funding calendar due to maturities and we are very comfortable with that. It really matches up with where we’ve been in the last couple of years; this year and last year. It’s just that it is ever so slightly front-loaded. So I think we are focused on that first six-month period and likely would come into the year with a marginally elevated level of liquidity to sort of de-risk that.

Liquidity is a factor that also is starting to lessen in its overall cost. And one way to sort of think about it is, I mentioned that we just did -- we got tied up three-year money for LIBOR plus 130. If you just use the 130 as a cost to carry, Sanjay, basically $13 million per $1 billion or, say, $1 million a month. So it really is not going to be a factor that it used to be. If it cost you $1 million a month per $1 billion, $3 million per quarter per $1 billion, even if we were to elevate it a couple of billions, that would be $6 million cost. So it’s not going to round necessarily. It’s a real small number of basis points. And I think those other factors in the margin are going to be more things that sort of really dominate the landscape and the direction of it.

Sanjay Sakhrani – KBW

Just on the asset side, are you predominantly variable now or is that something that will be achieved kind of into early next year?

Roy Guthrie

No, we’ve completed our changes. It’s -- we are -- our standard APRs on our accounts are tied to prime. And --

Sanjay Sakhrani – KBW

That’s 100% variable then?

Roy Guthrie

Virtually. I mean, we are done making the changes. We’ve only been marketing very well for the last two years. So this has been an ongoing shift. But I don’t expect to see fixed rates exist in the industry. I don’t see how you can have an open-ended unsecured loan that has -- you have no ability to change the rate in a higher inflation environment that some day could happen.

Sanjay Sakhrani – KBW

Understood. And then just on the liability side, I mean, is it pretty much safe to assume that most of the deposits are fixed? Or do you guys hedge out some of that interest rate?

Roy Guthrie

Most of the deposits are fixed. We do have – I have drawn [ph] this according to the tension to our new savings product. You might want to check that out on our website. It’s been -- I think it’s been a real winner. It’s introduced during the course of this quarter. So the savings in money market account is resilient in that portfolio of products, which I think I would characterize more as floating, but the term certifications, yes, are all fixed.

Sanjay Sakhrani – KBW

Okay, great. And then just one final one, David, I’ve noticed a flurry of announcements on the acquiring side. And I think you guys alluded to it earlier. Could you just talk about the goal posts maybe for this year and next as far as penetration domestically and internationally? I know you guys have this third-party acquiring relationship probably -- I guess you are at the latter stages of getting up and running. I mean, where are we with that in terms of penetration relative to MasterCard and Visa? And then maybe if you could just touch on international as well. Thank you.

David Nelms

I would say, domestically we have signed the acquirers and we are still implementing the turn-on of the merchants. We believe we are on almost all new merchant signings that were included along with Visa and MasterCard. And so I’d say, this year and next year we’ll be continuing to make sure that all of the small merchants are turned on by those acquirers, and maybe more importantly that the sticker is up in the merchant, the clerk knows they take Discover now. And we still have a good amount of work to do this year and next to finish that.

In terms of international acceptance, I think I mentioned we’ll probably be turning it on up to about 50 countries globally for Discover cardholders by this year-end. And by next year-end is when we expend -- intend to turn on most of the other countries around the world through the Diners Club. And of course, there are about 8 million merchants. So we’ve got a lot of work to do to make all those connections. And we’re still not satisfied with the million merchants. So we are signing new acquirers around the world in a similar fashion to what we did here in the US, such history [ph] on Eastern Europe and so on to further expand Diners Club acceptance, which is very strong in some parts of the world, and probably Europe is where we have our biggest opportunities to improve it.

Sanjay Sakhrani – KBW

Okay, thank you.

Operator

And your next question will come from the line of Rick Shane with Jefferies. Please proceed.

Rick Shane – Jefferies

Hey, guys, thanks for taking my question. Most of them have been addressed. There were some comments about the increase in delinquencies this month, and I think that that’s pretty explainable. There was also in the chart -- excuse me, in the trust an increase in charge-offs and it was a relatively significant increase given the trends we’ve seen over the last several months. Can you just give us some context for that just like you did regarding the first stage delinquencies and how that factors into your guidance for losses during the quarter? I realized there is a difference between the trust and the managed data, but the trust is at least showing a higher loss rate than you are guiding to for the quarter at this point.

Roy Guthrie

Yes, Rich, I think the -- just for everyone’s benefit, our trust, I think, did show a tick-up sequential month in terms of charge-offs. By my eyes, it’s pretty consistent with where you saw some of the other superior performing trusts, and so it was broadly an industry phenomena across I think the better performing trusts. Some in there had some pretty significant rises that I think we don’t really use it as benchmarks. I think this reflects delinquency patterns that go back before basically -- you know, from a contractual standpoint, you reach back six, seven months. And I think you can see trust delinquency levels, six, seven months, that do translate into these charge-offs.

I would cite that one area of focus continues to be bankruptcy, which we’ve seen continue to rise in terms of the national filings that obviously are participation in that as well. I wouldn’t take away anything out of (inaudible), though I think individual month, I would guide you more to -- you can use a rolling three months or you can focus on the managed presentation, but never isolate a single month because the nuance is associated with that. At a minimum, manage a couple. And I think if you look at that number in the context of the guidance that we gave, you’ll find that -- certainly if you look at either two months or the three-month trailing, that they are pretty much in harmony with each other.

Rick Shane – Jefferies

I agree with that 100%. It is interesting because what at least the delinquencies show is, I would agree with you, that over the next four or five months you do have feasible delinquency trends that will roll forward on a six-month basis. But then the question is, given the increase in delinquencies we saw this month, is this a temporary five or six-month event and then we’ll see a pickup in charge-offs going forward? Is that the conclusion you guys would draw, or should we not read too much into the one-month increase in these years [ph]?

Roy Guthrie

Well, I think you should go back and -- and I think we are seeing here, as we talked about in the early part of this, the seasonal patterns where you basically get stabilization that comes after, I think, delinquency affairs are brought under control following a holiday spend, where you see now stability across the spring and summer months and historically, and we are suggesting prospectively, we are going to see seasonal deterioration into the fall.

And whether there is fundamental deterioration at the consumer level or whether there is seasonal behavior, it’s sort of been the dicey conversation that’s being, I think, carved up over the course of this summer and clearly it’s still resilient. I think just seasonal alone, you should expect to see these rise into the fall, and I guess our charge-off guidance sort of reflects that to a certain extent. The one wildcard I’d come back and mention is where bankruptcies are and how bankruptcies continue to sort of be a focus for us and I think a focus for the industry because they continue to rise.

Rick Shane – Jefferies

Great, guys. Thank you very much.

Operator

And your next question will come from the line of Brad Ball [ph] with Ladenburg FSG. Please proceed.

Brad Ball – Ladenburg FSG

Thanks. Just a couple of clarification questions, Roy. So, are you guys saying that the reserve release this quarter was entirely attributable to the securitization move of balance sheet of the $2 billion of receivables and I suppose the decline in overall managed receivables? Or are you saying that there is some improved outlook that’s baked into that reserve release as well?

Roy Guthrie

So if I went back again, Brad, I think that there was a reserve rate increase sequential quarter. I think that’s very harmonious with the guidance that we provided, 8.40%, 8.39% into the mid-to-high 8s in the fourth quarter. So yes, we had a rate increase in our reserve sequential quarter. That’s the look forward measure. You saw delinquency pick up maybe a basis point or two. The majority of the action in the reserve this quarter did come from off-balance sheeting receivable through the trust action, the $1.6 billion of Class D that was retained on our balance sheet and the issuance to third-party investors of $1.5 billion through the TALF program.

Brad Ball – Ladenburg FSG

Okay. And you also mentioned in your prepared remarks, Roy, that you are seeing some non-TALF act strength in the market. I wonder if you could just give us a little color on what you are seeing out there. And do you think you could do a non-TALF deal over the near-term with the pricing that you have been talking about, L plus 130?

Roy Guthrie

Well, I think that -- you know, there had been non-TALF deals done. They tend to be short. But the deals that we have actually done have had cash buyers in them. So they have not been a 100% taken down by investors that are using the TALF facility to leverage it. And so we’ve seen cash buyers in the program. We are re-engaging with cash investors that were historically part of our program and have positions in our bonds. And so we are feeling better and better and better about that, but it starts slowly and it kind of continues. Right now, we’ve obviously executed with a combination under the TALF program. If we saw for out-the-curve two and three-year type issuance, the ability to sort of getting and execute at comparable levels, we would clearly take advantage of that.

Brad Ball – Ladenburg FSG

Okay. And then finally, following up on the questions about your margin, can you give us a sense as to the 64 basis point link quarter improvement, how much of that is attributable to the repricing and the reduction in balance transfers as opposed to improvement in funding cost?

Roy Guthrie

Yes, very little of that was related to improving in funding costs. I’d mention the number one thing was that the FDIC special assessment that was resilient in last quarters, around 16 -- $15 million or $16 million. So we had some improvement from that, plus marginal improvement in the underlying rate. The rest of it was lower standard balances and lower proportion of promotional balances.

Craig Streem

Next question please.

Operator

Your next question will come from the line of John Stilmar with SunTrust. Please proceed.

John Stilmar – SunTrust

Thank you. Good afternoon. I’d like to start quickly with revenue margins. This quarter you had nearly a 14% revenue margin, and I define that as net interest income plus non-interest income and on the back of very strong topline performance. This is almost 200 basis points above where you guys were in 2007. The real question is, as we kind of move forward in this business, the retrenchment of credit, the ability to reprice, how much of that revenue margin will really stick around post legislation, post the shift and in marketing dollars towards higher end? Can you give us some sense about how much of this current margin might stick around?

Roy Guthrie

Well, I would say that a large piece of the margin increase is the low rate environment. And so if you look at how much funding costs have come down since ’07, it’s significant. And we would expect to have higher margins in the higher charge-off environment and vice versa. So at some point, we would expect credit to start improving interest rates to start rising and our margins to come back in to a tighter level. And certainly right now, the credit has risen more than the margin has increased, which is giving us -- hurting our profits. And at some point, we would hope that losses drop faster than margin.

John Stilmar – SunTrust

Okay, perfect. Thank you. And then I’m just going to put a finer point with regards to this -- in terms of credit and the question is -- wanted to make sure I was clear. The increase -- the little blip that we’ve seen, is it your guy’s view in early stage delinquency that a preponderance of that is seasonal or is it more so driven by a minor seasonality with a majority impact of the negative effects of repricing? I just wanted to kind of make sure that I heard on a crystal clear basis which was the primary driver and your opinion of that increase. Thank you.

David Nelms

I don’t -- I would not think any of it was repricing related, because if anything, as you back off on delinquency pricing, the riskiest customers are paying less than they might have in previous environments. So I would point you back to Roy’s comments that small blips from month to month, I wouldn’t read too much into it. And it’s very tough to separate seasonality from the macro pieces, and that’s one reason we are giving you a forecast for one quarter out and it’s really hard for us to determine for sure even what the first half is next year.

Operator

And our final question will come from the line of Henry Coffey with Sterne, Agee. Please proceed.

Henry Coffey – Sterne, Agee

Yes, good morning, everyone. I know on the last call you did a very good job of quantifying the impact of over-limit fees with the changes that you put in place. A whole bunch of other items get impacted such as late fees, et cetera. Could you give us a little more sense of what the outlook is for 2010 in terms of how the fee income line is likely to be impacted?

David Nelms

Well, it’s not clear at this point that late fee income will be impacted. Our late fee income was highest probably five or ten years ago. It’s been on a long-term downward trend. Right now, it’s a little elevated because of the higher delinquencies, as you’d expect. So I would think that late fees are most likely to fall when credit improves and you (inaudible) delinquent of customers. At this point, we think that the over-limit fee is the largest component on the fee lines that would be impacted. And most of the other changes impact the net interest margin line, which is kind of why we went through those various changes that we’ve made to position ourselves prudently for the new legislation on that.

Henry Coffey – Sterne, Agee

How do you turn that into a marketing advantage?

David Nelms

Well, we turn it into a marketing advantage, as I said before, by less focus on pricing, more focus on Cashback Bonus, overall value, and superior service, and our expanding acceptance.

Henry Coffey – Sterne, Agee

Thank you.

Operator

And your next question will come from the line of Scott Valentin with FBR. Please proceed.

Scott Valentin – FBR

Thanks for squeezing me in there. Just two quick questions. One, in terms of risk mitigation and maybe modification activity, as (inaudible) changed, you’re still actively closing accounts and reducing lines or has that slowed down? And then maybe in terms of modifications, had that activity picked up at all?

David Nelms

On the first question, we’ve pretty well completed closure of inactive accounts. And for the most part, customers who were inactive for more than a year, we’ve closed rather than leave them open for years and years and years with no activity. And I’m sorry, I missed your second question.

Scott Valentin – FBR

I just want to -- in terms of modification activity, so re-aging accounts et cetera, if there has been any pickup there?

David Nelms

Re-aging, there were very specific rules that went in place. I think it was in 2001 under FFIEC, and we religiously followed those rules since that time. So there has been no change in our re-age and it’s very small part of our portfolio.

Scott Valentin – FBR

Okay. And just on station activity, I believe Discover pulled back less than peers in terms of the amount of mailing that went out. Are you seeing a better quality customer now and maybe acceptance rates are a little bit higher given the lost competition?

David Nelms

Yes. We were maybe the most -- had the highest number of mailings in the first half of the year, I think, despite us pulling back as well. But we are seeing better response rates than we have seen in quite a few years, but I would also say that given the economic environment, it’s -- we are being very careful to pick through and make sure that we only approve customers who are more confident and can be able to stay current on us [ph].

Scott Valentin – FBR

Okay. Thanks very much.

Operator

And your next question will come from the line of Eric Wasserstrom with Galleon Group. Please proceed.

Eric Wasserstrom – Galleon Group

Thanks for squeezing me in, but my questions have been addressed.

Operator

And our next question will come from the line of Moshe Orenbuch with Credit Suisse. Please proceed.

Craig Streem

It looks like we may have lost Moshe. Do we have anyone else in queue?

Operator

Okay. There are no further questions in the queue at this time. I will now turn the call back over to Craig Streem. Please proceed.

Craig Streem

Excellent. Thank you, operator. Thank you all for your attention this morning. We ran a little bit over because we wanted to be absolutely certain to take everyone’s calls and take care of those needs. So again, thank you for your interest. Any follow-up, please come back to me. Have a good day. Thanks.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and have a good day.

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Source: Discover Financial Services F3Q09 (Qtr End 08/31/09) Earnings Call Transcript
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