Capital One’s (COF) $35.3 billion merger with Discover Financial Services ($DFS) is causing quite a stir in the financial sector. If this deal goes through, it will make Capital One the largest credit card issuer in the U.S., surpassing JPMorgan Chase (JPM). It will create a financial powerhouse with over $250 billion in loans and over 305 million cardholders. The merger could reshape the banking landscape, giving Capital One a competitive edge over giants like Visa (V) and Mastercard (MA). But as big as this deal is, it’s facing serious challenges with legal battles on the horizon.
One Hurdle after Another
One of the biggest roadblocks is regulatory scrutiny. Several agencies, including the Department of Justice (DOJ), Federal Trade Commission (FTC), and the Federal Reserve, closely examine the deal to ensure it doesn’t harm market competition. There are concerns that the merger could reduce consumer choice, especially for subprime borrowers, and potentially increase prices. The regulators are moving cautiously, with the review process expected to take up to 18 months. On top of that, new merger policies announced in 2024 have made it clear that regulators are taking a hard look at bank mergers to prevent anti-competitive behavior.
The legal challenges don’t end there. Three lawsuits have been filed against the merger, alleging that the companies didn’t disclose enough information to shareholders and that the merger could harm consumers by limiting their options. The New York Attorney General is also investigating how this merger would affect competition in the credit card market, especially for low-income borrowers.
Shareholders Are All In
Despite these challenges, the merger received a significant green light when over 99% of Capital One and Discover shareholders approved the deal in February 2025. However, the deadline for finalizing the merger has been extended to May 19, 2025, to allow more time for regulatory approvals and legal reviews.
For now, Capital One and Discover customers won’t see any immediate changes, but once the merger is complete, things could shift rapidly, especially for international travelers. Capital One plans to move its cards to Discover’s payment network, which could affect how users make payments outside of the U.S. since Discover isn’t as widely accepted abroad as Visa or Mastercard.
This merger has the potential to shake up the banking world, but whether it will actually close is still up in the air. With major hurdles to overcome, it’s clear that the path ahead is far from smooth.
Is Capital One Stock a Good Buy?
Turning to Wall Street, Capital One is considered a Moderate Buy based on 16 analysts’ ratings. The average price target for COF stock is $213.07, implying a 6.24% upside potential.
