August 5, 2013 / 8:54 PM / in 4 years

Fitch Expects to Rate Discover Bank's Senior Notes 'BBB'

(The following statement was released by the rating agency) NEW YORK, August 05 (Fitch) Fitch Ratings expects to rate Discover Bank's senior unsecured notes 'BBB'. Discover Bank is a wholly owned subsidiary of Discover Financial Services, with a long-term Issuer Default Rating (IDR) of 'BBB'. The notes are expected to mature in August 2023. Issuance proceeds are expected to be used for general corporate purposes. KEY RATING DRIVERS Discover's Stable Rating Outlook reflects the expectation for earnings consistency, peer-superior asset quality, and the maintenance of strong liquidity and risk-adjusted capitalization. While Discover will reduce capital ratios to its targeted range over time, Fitch expects the bank to do this in a prudent manner. Increased revenue diversity, proven competitive positioning and credit performance in non-card loan categories over time, enhanced funding flexibility and/or further clarity on regulatory and legislative issues, particularly as it relates to the student loan sector, could support positive rating momentum. Conversely, negative rating action could be driven by a decline in earnings performance, resulting from a decrease in market share or credit deterioration, a weakening liquidity profile, significant reductions in capitalization, and legislative and/or regulatory changes that alter the earnings prospects of the credit card and/or student loan businesses. Negative rating momentum could also be driven by an inability of Discover to maintain its competitive position and earnings prospects in an increasingly digitized payment landscape. While the company is focused on strategic acquisitions and alliances to expand its online and mobile capabilities, competition from technology companies and social networks, with access to significant consumer data, is expected to intensify. Discover is a leading credit card issuer and electronic payments company that authorizes, processes, and guarantees the settlement of cardholder transactions on the Discover, PULSE, and Diners Club networks, and extends credit on a revolving basis to Discover cardholders. The company had $62 billion in loan receivables at June 30, 2013 and its stock is listed on the NYSE under the ticker symbol DFS. Fitch expects to assign the following rating: Discover Bank --Senior unsecured debt 'BBB'. Fitch currently rates Discover as follows: Discover Financial Services --Long-term IDR 'BBB'; --Short-term IDR 'F2'; --Viability Rating 'bbb'; --Senior debt 'BBB'; --Preferred stock 'B+' --Support '5'; --Support Floor 'NF'. Discover Bank --Long-term IDR 'BBB'; --Short-term IDR 'F2'; --Viability Rating 'bbb'; --Short-term deposits 'F2'; --Long-term deposits 'BBB+'; --Subordinated debt 'BBB-'; --Support '5'; --Support Floor 'NF'. The Rating Outlook is Stable. Contact: Primary Analyst Meghan Neenan, CFA Senior Director +1-212-908-9121 Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 Secondary Analyst Brendan Sheehy Director +1-212-908-9138 Committee Chairperson Joo-Yung Lee Managing Director +1-212-908-0560 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria', Aug. 15, 2012; --'Finance and Leasing Companies Criteria', Dec. 11, 2012. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Finance and Leasing Companies Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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