US Bank Profits Dip Due to Capital One-Discover Deal: FDIC

US bank sector profits dip due to Capital One-Discover deal, according to FDIC data. Capital One's acquisition of Discover led to a $4.1bn decrease in earnings for the US banking sector in Q4 2022. The deal affected 15 banks, with some experiencing significant drops in earnings, while others saw minimal impact. The sector's overall profit declined by 7.1%.

The US bank sector experienced a significant dip in profits during the second quarter of 2025, according to data from the Federal Deposit Insurance Corporation (FDIC). The merger between Capital One and Discover Financial Services, which was completed in May 2025, had a substantial impact on the sector's earnings. The FDIC reported that the sector's total profits declined by 1%, amounting to $69.9 billion, compared to the same period in the previous year [1].

The main contributor to this decline was the provision expense related to the merger, which increased by $7.6 billion, or 33.7% from the prior quarter. This one-time cost was the primary reason for the sector's overall profit decrease of $677.3 million. Despite this, the FDIC noted that domestic deposits increased for the fourth consecutive quarter, and loan growth accelerated, indicating positive trends in other areas [1].

The FDIC also highlighted continued weakness in some portfolios, particularly commercial real estate and credit cards, which had overdue rates higher than the pre-pandemic average. These factors contributed to the overall decline in the sector's profitability. However, the merger's impact was not uniform across all banks. While some experienced significant drops in earnings, others saw minimal impact, highlighting the varied effects of the deal on individual institutions [1].

The Capital One-Discover merger was not the only significant event affecting the US banking sector. Zelle, the payments network operator, faced a lawsuit from the New York Attorney General over alleged fraud, and Capital One Financial reported a 3.67% credit card delinquency rate in July 2025 [2]. These events further underscored the challenges faced by the sector and the need for continued vigilance in risk management and regulatory compliance.

In contrast, Scotiabank reported strong earnings growth in its Q3 2025 results, driven by 12% revenue growth and a 12.4% return on equity. The bank's strategic focus on technology and digitization investments aims to drive operating leverage and balance buybacks with organic growth priorities [3]. However, the sector's overall performance remains influenced by the ongoing impact of the Capital One-Discover merger and other regulatory and market challenges.

References:
[1] https://finance.yahoo.com/news/us-bank-sector-sees-profit-141524338.html
[2] https://www.marketscreener.com/news/sector-update-financial-ce7c50d9df8dfe2c
[3] https://www.ainvest.com/news/sc-q3-2025-earnings-call-contradictions-loan-growth-capital-deployment-pcl-provisions-shareholder-returns-2508/