Discover Financial Services

The credit card giant must reckon with the high costs of integration before it can start reaping the benefits from its landmark acquisition. CEO Richard Fairbank said Tuesday that those costs will exceed the company's original $2.8 billion guidance.

Almost 15 months after its announcement, Capital One Financial Corp.'s takeover of Discover Financial Services was officially completed on Sunday, creating the largest credit-card issuer by loan volume in the US.

Both the Federal Reserve and the Office of the Comptroller of the Currency signed off on the $35 billion transaction, which has faced opposition since it was announced last February.

Following a media report that Department of Justice staffers have expressed concern about how Capital One's purchase of Discover would affect competition in the subprime credit market, analysts said the portfolio would be tough to sell. But they remain optimistic that the deal will get over the finish line.

The $35 billion transaction has faced pushback from critics on antitrust grounds since it was announced a year ago. The vote today puts the deal one step closer to closing.

The two companies continue to tick items off their year-end to-do list, which analysts hope will tee up the merger for finalization in early 2025. Regulatory approval remains a major question.

The Capital One-Discover merger, the war against Visa and Mastercards' swipe fees and budding payment technologies were most popular with American Banker readers in 2024.

New York Attorney General Letitia James asked a state court for permission to issue subpoenas to Capital One as part of an ongoing antitrust probe by the state,

During Thursday's earnings call, Chief Financial Officer John Greene told analysts that "everyday living expenses" are a challenge.

Community and advocacy groups opposed Capital One's proposed acquisition of Discover in a hearing held by federal regulators on Friday.

The credit card company sold its student loan business, which long drew the ire of regulators. It also set aside substantial funds to cover looming regulatory penalties.

The credit card giant says its proposed acquisition of Discover would facilitate a bevy of community development activity and philanthropy. But some public advocacy groups are skeptical.

The lawsuit settlement clears a hurdle for the credit card company's deal with Capital One, which has vowed to address Discover's compliance shortcomings. A public hearing on the merger is scheduled for July 19.

If Capital One successfully buys Discover Financial Services, it would create an entity with an enormous amount of power. That could lead to abuses of vulnerable consumers.

The decision will turn on whether regulators think the merged company would lessen competition or pose a significant threat to the broader economy if it runs into financial distress.

Capital One, like Discover, is showing signs of greater stress in its loan portfolio. Credit-card write-offs totaled $2.2 billion in the first quarter, a 61% increase from a year earlier.

New details have emerged about the negotiations that culminated in Capital One's blockbuster $35 billion agreement to acquire Discover. At one point last December, the two parties broke off discussions, according to a securities filing.

Some online banks that offer high-yield savings accounts are making those products a little less high-yielding. Banks are also shortening the duration of new CDs, hoping that anticipated rate cuts by the Fed will enable them to start paying less to consumers.

Banking regulators and the Department of Justice must decide whether the blockbuster deal raises antitrust concerns. Looming over their analyses are questions about how broadly or narrowly to define the relevant markets.

Ally Financial ended a six-month search for its next chief executive by hiring Discover CEO Michael Rhodes. The move adds a new wrinkle to Discover's pending sale, though Discover said that Rhodes hadn't been expected to have a long-term role at Capital One following the merger's completion.