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US lender Capital One is nearing a deal to buy rival Discover Financial, according to a person familiar with the matter, in a tie-up that would unite two of America’s largest credit card companies.
A deal between Capital One and Discover, which has a market value of almost $28bn, could be announced as early as Tuesday, the person said, cautioning that the talks might still collapse.
A merger between Virginia-based Capital One and Illinois-based Discover would shake up the US credit card landscape and mark one of the industry’s biggest deals since the 2008 financial crisis.
Capital One, the ninth-largest bank in the country with a market capitalisation of $52bn, and Discover, are two of the biggest credit card lenders, behind JPMorgan Chase and Citigroup. Discover also offers a payment network, making it a competitor with the likes of Visa and Mastercard.
Capital One and Discover did not immediately respond to requests for comment. News of the talks was first reported by Bloomberg earlier on Monday.
The last big merger between two banks occurred almost five years ago, when regional lender BB&T bought SunTrust for about $28bn in a $66bn deal, forming Truist.
Consolidation in the highly fragmented US banking sector has long been expected but several large players have struggled to successfully integrate and capture the synergies hoped for when two rivals combine.
The potential deal comes at a time when US regulators are planning to reform bank merger rules in an effort to boost transparency and increase scrutiny of deals.
A Capital One acquisition of Discover is likely to be examined carefully by US antitrust regulators given the large size of the two companies’ credit card businesses.
After a weak year for dealmaking in 2023 partly due to tougher antitrust enforcement and high interest rates, recent months have seen a resurgence in megadeals as chief executives become more confident that they can complete transactions.
Over the past few months ExxonMobil agreed to acquire shale group Pioneer Natural Resources for $60bn, Chevron reached a deal to buy Hess for $53bn and chip design toolmaker Synopsys announced the takeover of engineering software maker Ansys for $35bn.
Capital One, known in America for its “What’s in your wallet?” advertising slogan delivered by celebrities such as Samuel L Jackson and Jennifer Garner, is the 12th-biggest US bank by assets.
It was one of several lenders that came under pressure following the collapse of Silicon Valley Bank in March last year.
Capital One’s stock has since recovered, boosted in part by Warren Buffett’s Berkshire Hathaway taking an almost $1bn stake.
Discover announced in December that it had appointed former TD Bank executive Michael Rhodes as its chief executive, months after the sudden departure of the company’s former boss Roger Hochschild.
Credit card lenders saw very low delinquency rates following government stimulus programmes during the Covid-19 pandemic but have warned that consumers are gradually spending down much of their excess savings.
