In a year-long research, JP Morgan Chase & What JPM discussed a potential deal with Discover financial services DFS Before Capital One financial company COF sealed the $35 billion offering for the credit card company.
The primary motivation behind JPMorgan’s interest was to gain control of Discover’s Pulse electronic payments network.
Despite actively exploring the deal starting in mid-2021, JPMorgan ultimately abandoned its efforts in mid-2022 when it failed to convince Discover of its merits.
A potential JPMorgan-Discover merger faces significant regulatory challenges, considering JPMorgan’s position as the largest credit card lender in the United States, the Financial Times noted.
The Capital One deal, which recently relegated JPMorgan to second place, underlines the banking giant’s commitment to owning a payments network and reducing reliance on third-party providers such as Visa Inc V AND Mastercard Inc BUT.
Sources close to the discussions revealed that a JPMorgan-Discover deal, code-named “Diplomat,” would be a game-changer for the company.
Discover stands out in the sector by operating as a card issuer and payments network, a rare combination, the FT report highlights.
CEO of Capital One, Richard Fairbank, called this dual capability the bank’s “Holy Grail” after securing the deal. On the other hand, JPMorgan faced regulatory limitations due to its colossal size, which prevented it from acquiring other banks.
Despite these obstacles, JPMorgan CEO, Jamie Dimonsupported efforts to acquire all or part of Discover.
However, the regulatory and antitrust challenges associated with the JPMorgan-Discover deal were substantial.
While doubts remain about regulatory approval for Capital One’s acquisition of Discover, the path appears less arduous than if the buyer were JPMorgan.
An expanded Capital One would control less than 10% of U.S. deposits, a crucial factor that could facilitate a smoother approval process than JPMorgan, which already exceeds that threshold.
Price Action: COF shares rose 1.01% to $137.11, while DFS shares rose 1.81% to $121.56 at last check on Thursday.
Disclaimer: This content was partially produced with the help of artificial intelligence tools and was reviewed and published by Benzinga editors.
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