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“Discover has done a better job of bringing in a lot of deposits and [has] Access to many institutions to operate the debit card network and provide the service. “It gives them a lot of ability to raise deposits, which is very important especially in the current market,” said David Schiff, president of consumer retail and banking at West Monroe.
CNBC has reached out for comment from both Capital One and Discover.
The merger of the two companies, which are among the largest credit card issuers in the United States, would expand Capital One's credit card offerings and deposit base. The company purchased a digital concierge service Black speeda platform for premium credit cards and luxury products marketplace, was founded in June last year.
Schiff said there are not many similarities to similar acquisitions in the financial industry, which means the Capital One-Discover deal is likely to have broad implications for merger activity within the sector.
“It's a good example of the risks we see in the market, where interests are competing on the part of regulators to increase control and stringency versus competitive requirements that are presented quite clearly, in relation to the overall market,” Schiff said.
The deal comes amid a period of increasing pressure on Discover, including regulatory scrutiny and oversight New leadership. Current CEO Michael Rhodes was announced in December 2023.
Shares of Discover fell 1.7% over the year, giving the company a market cap of $27.63 billion. Capital One has a market cap of $52.2 billion and the company's shares will rise 4.6% in 2024.
Bloomberg News reported on Monday that Capital One He was considering acquiring Discover.
The Capital One-Discover merger will be one of the largest deals announced so far this year. Synopsys announced a deal to buy Ansys for $35 billion in January, and Diamondback Energy's $26 billion deal to buy private oil and gas production company Endeavor Energy was announced on February 12.
Read the full story here: Capital One is buying Discover Financial, sources say
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