Morgan Stanley reversed itself in August and announced it would keep its Discover Financial Services division, the issuer of the Discover card and operator of the Discover processing network.
John J. Mack, Morgan's chairman and CEO, said in a statement that Discover was "a strong business ... with growth opportunities" that would help Morgan "significantly improve profitability."
Mack listed nine bullets touting Discover's value, including pre-tax earnings of $1.27 billion in fiscal 2004 that accounted for 19% of Morgan's pretax earnings, its purchase in January of the Pulse debit network, a new partnership with China UnionPay, court decisions allowing financial institutions to issue its cards, and a growing card business in the United Kingdom.
"We've got momentum," David Nelms, chairman and CEO of Discover, said after Mack's announcement.
Many of Discover's accomplishments have occurred in the last year, notes Nelms, and each step forward builds upon the last one. For example, buying "Pulse made China UnionPay possible. We expect our first transaction in the next couple of months," Nelms says.
China UnionPay owns a national payment network used by all of China's banks and their 800 million customers. Virtually all those consumers have or could have a PIN debit card, says Nelms. Transactions conducted in the U.S. by China UnionPay cardholders will travel over the Pulse network. Likewise, the transactions of Discover cardholders in China will be processed over the China UnionPay network, he says.
In April, Morgan Stanley, then led by Philip J. Purcell, announced it would spin off the Discover division. Purcell said that spinning off Discover would allow Morgan to better concentrate on its securities business. But Purcell resigned in June, and Mack was named his successor with promises to review Morgan's plans.
(c) 2005 Cards&Payments and SourceMedia, Inc. All Rights Reserved.
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