Monday, May 20, 2024

Capital One waiting for regulatory approval of Discover acquisition


As it waits for regulators to approve its $35 billion acquisition of payments network Discover, Capital One is “fully mobilized to plan and deliver a successful integration.” 

Adding Discover will make the $475 billion bank a more “diversified, vertically-integrated global payments platform,” and Discover’s payment volume generated from its 100 million customers will scale Capital One operations and reach, Chief Executive Richard Fairbank said during Capital One’s first-quarter earnings call on April 25.

Courtesy/Bloomberg

All applications for regulatory approval have been filed, Fairbank added. 

In the first quarter, Discover reported payment volume of $51.8 billion, flat year over year, on its Discover Network.  

“The Capital One team is leading the integration planning process,” Michael Shepherd, chief executive of Discover, said during the company’s earnings call on April 18. “The process has achieved the first important milestone, the submission of the merger applications to the Federal Reserve and the [Office of the Comptroller of the Currency].” 

Capital One will “leverage and scale the benefits of our 11-year technology transformation across every business and the network, which will serve as a catalyst for innovation and enhanced capabilities in risk management and compliance, underwriting, marketing and customer service,” Fairbank said on the April 25 call. 

The merger’s tech cost is expected to be $2.8 billion, according to Bank Automation News’ prior reporting. 

THE BIG PICTURE: Many financial institutions are preparing for a wave of mergers and acquisitions in 2024.  

Morgan Stanley is deploying technological tools to aid M&A activities while Goldman Sachs is eyeing increased revenue from a potential increase in M&A activities. 

BY THE NUMBERS: In Q1, Capital One reported; 

  • Net revenues of $9.4 billion, down 1% YoY; 
  • Employees of 51,300, down 9% YoY; 
  • Net interest income of $7.4 billion, up 4% YoY; and 
  • Net income of $1.2 billion, up 33% YoY. 

OF NOTE: The Federal Reserve has extended the public comment period on the acquisition of Discover until May 31. The initial deadline was today.  

Of six public comments posted on the Fed’s website, five are opposed to the merger to avoid consolidation of financial services in the industry. 

NOTEWORTHY: Its technology and digital-first banking capabilities are driving Capital One deposits, Fairbank said.  

In Q1, Capital One reported total deposits of $2.8 billion, up 52% YoY, according to the bank’s earnings report. 

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