Capital One invested heavily in integrating Discover Financial Services in the third quarter as it prepares to acquire the company, providing the transaction is approved by the Federal Reserve. 

The deal is expected to be finalized in early 2025 if it lands regulatory and shareholder approval, Richard Fairbank, chairman and chief executive at Capital One, said during the bank’s Oct. 24 earnings call.  

Capital One increased Discover integration costs in Q3 to $63 million, up from $31 million in Q2, according to the bank’s earnings supplement.  

Acquiring Discover will “deliver compelling financial results and offer the potential to enhance competition and create significant value for merchants and customers,” Fairbank said during the call. 

He said the acquisition will also bring: 

• A consumer banking and global payments platform; 

• More modern technology; and 

• More than 100 million customers.  

BY THE NUMBERS: Capital One in Q3 increased its noninterest expense, including tech spend, to $5.3 billion, a 9% year-over-year increase.  

“We expect a sequential-quarter increase in operating expense in the fourth quarter, that will be roughly in line with historical patterns as we continue to invest in our technology transformation,” Fairbank said. 

The company also reported in Q3: 

• Total revenue of $10 billion, a 7% YoY increase;  

• Net income of $1.8 billion, relatively flat YoY; and  

• Efficiency ratio of 53.1%, down from 51.8% YoY. 

NOTEWORTHY: Capital One expects to spend $2.8 billion on Discover integration costs, including tech conversion, in total, according to a Feb. 27 release from Capital One. 

“Capital One certainly has some good experience in the space. … They have done a number of tuck-ins and so I imagine they have [an acquisition] playbook,” Matthew Goldman, founder and president of Pasadena, Calif.-based consulting firm Totavi, previously told Bank Automation News. 

MARKET REACTION: Shares of Capital One Financial Corp. (COF) increased 5.27% to $161.27 per share at market close. Capital One has a market capitalization of $61.58 billion. 

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