Citi still expects Capital One deal to close, says subprime not a new issue

Citi analyst Keith Horowitz notes that Bloomberg reported yesterday that traders circulated a Capitol Forum report claiming that the DOJ may oppose Capital One’s (COF) acquisition of Discover (DFS) due to antitrust concerns related to subprime exposure. However, this issue has been discussed since the announcement of the merger. If one pulls together the seven largest U.S. card players and look at subprime balances, Discover increases Capital One’s share to about 43% from 31%, notes the analyst, who adds that Capital One issued a statement that they remain “well-positioned” for deal closure. The firm’s view remains that if DOJ finds issue with this subprime concentration, Capital One will work with regulators to find a compromise, adding that its working assumption remains the deal closes. Citi has a Buy rating on Capital One shares.