JPMorgan's Chase for Discover: A Tale of Missed Opportunities and Regulatory Roadblocks

In a year-long pursuit, JPMorgan Chase & Co JPM discussed a potential deal with  Discover Financial Services DFS before Capital One Financial Corp COF sealed the $35 billion bid for the credit card company. 

The primary motivation behind JPMorgan’s interest was gaining control of Discover’s Pulse electronic payments network. 

Despite actively exploring the deal from mid-2021, JPMorgan eventually abandoned its efforts in mid-2022 when it couldn’t convince Discover of its merits.

A potential JPMorgan-Discover merger faced significant regulatory challenges, considering JPMorgan’s position as the largest U.S. credit card lender, the Financial Times noted. 

The Capital One deal, which recently relegated JPMorgan to second place, emphasizes the banking giant’s commitment to owning a payments network and reducing reliance on third-party providers like Visa Inc V and Mastercard Inc MA. 

Sources close to the discussions revealed that a JPMorgan-Discover deal, codenamed “Diplomat,” would have been a game-changer for the company.

Discover stands out in the industry by operating as a card issuer and a payments network, a rare combination, the FT report highlights. 

Capital One’s CEO, Richard Fairbank, referred to this dual capability as the bank’s “Holy Grail” after securing the deal. On the other hand, JPMorgan faced regulatory limitations due to its colossal size, preventing it from acquiring other banks. 

Despite these hurdles, JPMorgan’s CEO, Jamie Dimon, supported efforts to acquire all or part of Discover.

However, the regulatory and antitrust challenges associated with a JPMorgan-Discover deal were substantial. 

While doubts about regulatory approval for Capital One’s Discover acquisition linger, the path seems less arduous than if JPMorgan were the buyer. 

An enlarged Capital One would control less than 10% of U.S. deposits, a crucial factor that could facilitate a smoother approval process compared to JPMorgan, which already surpasses that threshold. 

Price Action: COF stock is up 1.01% at $137.11, and DFS shares are up 1.81% at $121.56 on the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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