Discover Financial Services will be acquired by Capital One Financial for an astounding $35 billion

Discover Financial Services is being acquired by Capital One Financial for an astounding $35 billion. This will unite the two largest credit card companies and lenders.

Shareholders of Discover Financial are expected to receive Capital One shares at a price of around $140, according to a press statement from the firm. According to reports, the former concluded Friday’s trading at $110.49.

Discover, located in Illinois, was the 33rd-largest bank in the US, while Virginia-based Capital One ranked 12th. The fact that more Americans are using credit cards has been advantageous for both businesses.

Notably, during the fourth quarter of 2023, total household debt levels rose by $212 billion. The New York Federal Reserve’s data indicated a twelve percent increase in this. Additionally, it is estimated that within the same time frame, Americans had $1.13 trillion in credit card debt.

The purchase will result in a notable increase in loan accounts and bank deposits. Additionally, the Discover payment processing network will be available to Capital One. Because of the Discover network, it will be able to collect fees for each merchant transaction that takes place on the network.

In recent times, Capital One has made an effort to draw in more high-end clients. Discover has historically favored concentrating on premium clients with higher credit scores.

Discover disclosed in the summer of last year that it had misclassified some card accounts beginning in the middle of 2007. The Federal Deposit Insurance Corporation issued an unrelated consent order to the corporation regarding its customer compliance management.

Citigroup analysts speculate that the regulatory difficulties may have driven the selling. “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,” analysts Arren Cyganovich and Kaili Wang reportedly wrote in a note to clients.

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