Dean Witter's trump card

Call it the contrarian card. Year after year, Discover confounds its detractors by ringing up hearty profits and big gains in receivables and volume.

Indeed, Discover has become a potent profit pump for parent Dean Witter, Discover & Co. in a business that is even more saturated now than it was in 1986, the year Discover was launched.

Discover generated net income of $320 million in 1993, or just more than half of Dean Witter's net income. By 1995, Wall Street analysts project, Discover will account for almost 60% of Dean Witter's income. Discover also ranks second to Citibank with $19 billion in receivables, up 15.8% in 1993, and first in total accounts with 29.3 million, 19.3 million of which are active. Charge volume grew 19% to $32.8 billion.

Now Dean Witter is hoping to duplicate Discover's success with its Prime Option MasterCard, issued by NationsBank. Prime Option, which pitches no annual fee and a prime-rate interest rate, opens the door for Dean Witter to carve out a slice of the bank card market. But it shouldn't cannibalize Discover because Prime Option is targeted at the consumer who occasionally revolves balances while Discover is aimed at value-conscious consumers.

Although NationsBank issues Prime Option, Dean Witter directs the card's marketing and buys back receivables from NationsBank.

Still, Discover is Dean Witter's flagship product in the card business, which is why Discover is working feverishly to narrow...