Capital One Financial set to buy Discover Financial Services for whopping $35 billion

The deal will bring two of the biggest lenders and credit card issuers together

Published on: Feb 20, 2024, 08:43:03 IST

By Sumanti Sen

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Capital One Financial is buying Discover Financial Services for a whopping $35 billion. This will bring two of the biggest lenders and credit card issuers together.

This combination of pictures created on February 19, 2024 shows an ATM at a Capital One Caf� on February 19, 2024, in Miami, Florida and the entrance of the Discover Financial Services corporate headquarters campus on February 19, 2024 in Riverwoods, Illinois (Photo by JOE RAEDLE and SCOTT OLSON / GETTY IMAGES NORTH AMERICA / AFP) (AFP)

A news release issued by the companies said that Discover Financial shareholders are set to receive Capital One shares at about $140. The former reportedly closed Friday trading at $110.49.

Virginia-based Capital One was the 12th largest bank in the US, while Illinois-based Discover was the 33rd. Americans' increased use of credit cards has been a blessing for both the companies.

Notably, aggregate household debt balances increased by $212 billion in the fourth quarter of 2023. Data from the New York Federal Reserve said that this was up 12 percent. Further, in the same period, Americans are said to have held $1.13 trillion on their credit cards.

The acquisition will significantly boost bank deposits and loan accounts. Capital One will also get access to the Discover payment processing network. It will get revenue from fees charged for all merchant transactions running on the network, thanks to the Discover network.

Capital One, in recent years, has tried to attract more premium customers. For a long time, Discover has preferred to focus on prime customers with better credit ratings.

Last summer, Discover revealed that it incorrectly classified some card accounts starting around mid-2007. The company got an unrelated consent order from the Federal Deposit Insurance Corporation over its customer compliance management.

According to analysts at Citigroup, the sale may have been prompted by the regulatory issues. In a note to clients, analysts Arren Cyganovich and Kaili Wang reportedly wrote, “We are surprised that DFS would sell, but suppose that its regulatory challenges such as its recent October FDIC consent order and the card product misclassification issue may have opened the door for the board to consider strategic alternatives that it may not have in the past.”

ABOUT THE AUTHOR
Sumanti Sen
Sumanti Sen covers everything that’s happening in the US, from politics to entertainment, but her expertise lies in covering crime news. She has comprehensively chronicled the Idaho student murders, the Laken Riley and Iryna Zarutska cases, and the killing of Charlie Kirk, among other incidents. Over the years, she has interviewed several victims/families of victims of crimes seeking justice. She digs up stories that might otherwise remain unheard, and does her bit to ensure that victims and survivors’ voices are heard. Sumanti’s many years of experience also include interviews with Hamas attack survivors and mental health experts, among others. Her coverage of the October 7 Hamas attack on Israel and interviews with survivors of the tragedy, coupled with her other works including the Titan submersible coverage, earned her the Digi Journo of the Quarter award during her first year at Hindustan Times. Sumanti actively tracks missing person cases in the United States, and peruses Reddit and other social media platforms to bring to light cases that frequently elude public attention. She has extensively covered the disappearances of Nancy Guthrie, Thomas Medlin, Beau Mann, and Sudiksha Konanki, among others. When not at work, you will either find her with her novels, or with her beloved rescue pooches.Read More

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