Capital One Decides to Wind Down Discover Home Equity Business

Capital One Financial Corporation COF has decided to wind down the home equity lending business it acquired while buying Discover Financial in May. The news was first reported by Banking Dive.

A spokesperson for COF said, “We conducted an extensive strategic business review of Discover’s home equity and refinance loan business to better understand its position and potential as part of Capital One’s business portfolio. In late June, we announced the difficult decision to exit this business. We are focused on supporting our customers and associates through this transition.”

Although COF is shutting the originations pipeline, it will continue to service the existing portfolio and assess strategic options for sale and servicing.

The number of employees affected by the move is not known yet. Most employees will likely take on other roles within the company or aid in the wind-down of the business, while some jobs may eventually be cut.

Details of the Capital One-Discover Financial Deal

In May 2025, after almost 15 months of announcing the agreement, COF acquired Discover Financial Services for $35 billion, a transaction that reshaped the landscape of the credit card industry, creating a behemoth.

The acquisition placed Capital One in a position to capture a bigger share of spending on cards and compete with well-known card issuers. COF now has control of Discover Financial’s payments network — one of only four in the United States, which will enable it to generate greater revenues from interchange fees and offer independence from the Visa-Mastercard duopoly.

However, the path to the deal completion was far from smooth. While Capital One and Discover Financial shareholders approved the transaction in February, the deal underwent extensive regulatory scrutiny. Final approval came in April from the Federal Reserve and the Office of the Comptroller of the Currency, after the U.S. Department of Justice opted not to challenge the merger.

Still, the green light came with conditions: Capital One must address outstanding enforcement issues tied to Discover Financial. In 2023, Discover revealed that it had overcharged merchants on certain credit card transactions since 2007 — a disclosure that drew regulatory attention and required corrective action.

Our Take on Capital One

Over the years, COF’s revenues have been driven by opportunistic acquisitions. Before acquiring Discover Financial, Capital One bought Velocity Black in 2023, bolstering the delivery of exceptional consumer experiences attributable to its innovative technology.

While the company’s revenues declined marginally in 2020, the metric witnessed a five-year (2019-2024) compound annual growth rate of 6.5%. Revenue prospects look encouraging, given Capital One’s solid credit card and online banking businesses, the Discover Financial buyout, and decent loan demand.

COF’s Price Performance & Zacks Rank

So far this year, shares of Capital One have gained 22.3% compared with the industry’s 21.9% growth.

Currently, COF carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Inorganic Growth Efforts by Other Finance Firms

Last month, Glacier Bancorp, Inc. GBCI entered a definitive agreement to acquire Guaranty Bancshares, Inc. GNTY, the bank holding company for Guaranty Bank & Trust, N.A., a leading community bank headquartered in Mount Pleasant, TX. The all-stock transaction is valued at $476.2 million.

Financially, the deal is expected to be immediately accretive to Glacier Bancorp’s earnings per share. The transaction is projected to generate an internal rate of return of 20% by the end of the first year after closing the deal.

Glacier Bancorp’s acquisition of Guaranty demonstrates a significant step forward in its long-term growth strategy. Building on its initial entry into the Southwest region through the 2017 acquisition of Foothills Bank in Arizona, GBCI is now poised to amplify its presence by entering the Texas market.

With Guaranty’s well-established footprint and expertise in the Texas market, the company will capitalize on Texas's robust economy. This move not only strengthens Glacier Bancorp’s position in high-growth markets but also aligns with its broader commitment to community banking through disciplined, strategic acquisitions.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research