Raphael Stevens

Capital One secured approvals from banking regulators Friday for its $35 billion acquisition of Discover Financial — a deal that analysts believe could have far-reaching benefits beyond just the Club holding. The news Wells Fargo research analysts said the greenlights from the Federal Reserve and the Office of the Comptroller of the Currency highlight a softer regulatory environment under the Trump administration. That bodes well for investment banking businesses in large U.S. banks such as fellow portfolio name Goldman Sachs . In a Sunday note, the analysts described the Capital One-Discovery merger as a “clearing event” for more bank deals that should likely “kick off further bank consolidation.” They added, “The approval is a down payment on the improved regulatory environment from the new administration.” Research analysts at Wells Fargo said the Discover acquisition will not only boost Capital One’s earnings potential but also provide “more than enough cushion to protect” it from an uncertain macroeconomic environment. The analysts reiterated their buy-equivalent rating on shares of Capital One, which said it has all the necessary approvals now and plans to close the Discover purchase on May 18. Capital One, which reports earnings after Tuesday’s closing bell, has three main segments: credit cards, consumer banking and commercial banking. It gets most of its revenue from credit cards. The merger development was not enough to boost financial stocks as concerns about President Donald Trump’s so-called reciprocal tariffs continue to rattle the market. Capital One shares, which shot up more than 5% shortly after Monday’s open, reversed lower and spent the afternoon around the flat line. Goldman was little changed after the open but saw declines accelerate as the S & P 500 sank more than 3%. COF 1Y mountain Capital One 1 year Big picture Coming into 2025, investors had high hopes that Trump’s more lenient stance on antitrust issues would lead to more mergers and acquisitions (M & A) and initial public offerings (IPOs). But with tariff and recession concerns gripping the market, deal activity has not rebounded as much as expected during the president’s first few months in office. Investment banks make money by offering M & A advisory services and IPO underwriting. Case in point: Heightened uncertainty about the outlook for the economy has disrupted plans for big-name IPOs like fintech firm Klarna and ticketing platform StubHub over the past month. Last week, Goldman also posted weaker-than-expected revenue for its investment banking division during the first quarter . CEO David Solomon acknowledged that dealmaking expectations have not panned out yet. “We are entering the second quarter with a markedly different operating environment than earlier this year,” Solomon said during the post-earnings conference call. Corporate clients are “concerned by the significant near-term and longer-term uncertainty that has constrained their ability to make important decisions,” the exec said. Bottom line We’re thrilled that bank regulators have decided to move forward with the Discover deal. It’s a key reason the Club first started a position in Capital One. The acquisition should support earnings growth and price-to-earnings multiple expansion over the long run. Upon completion of the transaction, Capital One, a major credit card issuer in its own right, will own Discover’s payment network, which will decrease its reliance on Mastercard and Visa . On Monday, we added to our Capital One position . “We got the catalyst we wanted in Capital One,” Jim Cramer said during the Morning Meeting. “The stock didn’t move [much]. That’s an opportunity.” GS 1Y mountain Goldman Sachs 1 year Like analysts, we’re also hoping this is a positive sign about the U.S. regulatory backdrop. Fewer deals blocked by regulators means more upside for Goldman’s crucial investment banking business. But for a material rebound, more clarity on tariff policy is needed. “What Goldman excels at is helping clients in a time of turmoil, and they did great there,” Jim said after the firm’s earnings last Monday. “But .. when you take a look at investment banking, they’re just not making a lot of money.” Thankfully, the weakness was offset by Goldman’s trading business due to the stock market’s volatility. WFC 1Y mountain Wells Fargo 1 year Finally, Club holding Wells Fargo also stands to benefit from a more lenient regulatory regime. Wells has been working to convince the Fed to lift the $1.95 trillion asset cap imposed in 2018 for misdeeds at the bank that predated CEO Charlie Scharf’s tenure. We think Scharf and his team have done a great job cleaning things up. It’s only a matter of time until the asset cap is lifted, which would allow Wells to expand its balance sheet. When that happens, Wells can grow its budding fee-based business like investment banking and not rely so heavily on interest-based revenues, which are at the mercy of the Fed’s monetary policy decision. (Jim Cramer’s Charitable Trust is long COF, GS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Screens display the logos and trading information for Capital One Financial and Discover Financial as traders work on the floor at the New York Stock Exchange on Feb. 20, 2024.
Brendan Mcdermid | Reuters

Capital One secured approvals from banking regulators Friday for its $35 billion acquisition of Discover Financial — a deal that analysts believe could have far-reaching benefits beyond just the Club holding. More

The backlash against remote work, when it came, was swift and fierce. After a post-pandemic honeymoon, when many companies flirted with the idea of letting staff work from home for ever, bosses began summoning employees back to the office. “I’ve had it with this…I’ve been working seven days a goddamn week since covid and I come in and—where’s everybody else?” groused Jamie Dimon, boss of JPMorgan Chase, in leaked comments from a recent townhall at the bank. More

The backlash against remote work, when it came, was swift and fierce. After a post-pandemic honeymoon, when many companies flirted with the idea of letting staff work from home for ever, bosses began summoning employees back to the office. “I’ve had it with this…I’ve been working seven days a goddamn week since covid and I come in and—where’s everybody else?” groused Jamie Dimon, boss of JPMorgan Chase, in leaked comments from a recent townhall at the bank. More

Chicago Federal Reserve President Austan Goolsbee.
Kate Rooney | CNBC

Federal Reserve Bank of Chicago President Austan Goolsbee on Monday urged against reducing the central bank’s independence as President Donald Trump amped up criticism of Chair Jerome Powell.
“The long-run expectations that the Fed would get inflation back down to the 2% target were critically important. Fed independence is critically important for that,” Goolsbee said on CNBC’s “Squawk Box.”

“When there is interference over the long run, it’s going to mean higher inflation, it’s going to mean worse growth and higher unemployment, because there’s just going to be a little less willingness to step up and do the hard things when the moment is tough,” he said, while declining to comment directly on what Trump has said.
Trump lobbed another salvo at Powell on Friday for not lowering interest rates. There have also been talks that Trump may try to pull strings on monetary policy both by legislation and possibly by installing a “shadow chair” who could undermine Powell’s authority.
“If we had a Fed Chairman that understood what he was doing, interest rates would be coming down, too,” Trump said, pointing to examples of falling prices. “He should bring them [interest rates] down.”
White House economic advisor Kevin Hassett said Friday that Trump and his team are assessing whether they can remove the Fed chair. Powell has said previously that he cannot be fired under law and intends to serve through the end of his term as chair in May 2026.
“I’ve been at the Fed for a little over two years. Before I was ever at the Fed, I would tell you, economists are basically unanimous that Fed independence is critically important,” said Goolsbee. “And to see why, just look at the countries where they don’t have Fed independence. Inflation is higher, unemployment is higher, growth is worse.”

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China has warned it will retaliate against countries that cooperate with the U.S. in ways that compromise Beijing’s interests, according to a statement from the Chinese Ministry of Commerce.
The threat comes as U.S. President Donald Trump’s administration is reportedly planning to use tariff negotiations to pressure U.S. partners to limit their dealings with China.
“China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will not accept it and will resolutely take reciprocal countermeasures,” the Chinese Ministry of Commerce said, according to a CNBC translation.

Dado Ruvic | Reuters

BEIJING — China on Monday warned it will retaliate against countries that cooperate with the U.S. in ways that compromise Beijing’s interests, as the trade war between the world’s two largest economies threatens to embroil other nations.
China’s warning comes as U.S. President Donald Trump’s administration is reportedly planning to use tariff negotiations to pressure U.S. partners to limit their dealings with China. Trump this month paused major tariff increases on other countries for 90 days, while hiking duties further on goods from China to 145%.

“China firmly opposes any party reaching a deal at the expense of China’s interests. If this happens, China will not accept it and will resolutely take reciprocal countermeasures,” the Chinese Ministry of Commerce said, according to a CNBC translation.
The ministry cautioned about the risk to all countries once international trade returns to the “law of the jungle.”
The statement also sought to cast China as willing to work with all parties and “defend international fairness and justice,” while describing the U.S. actions as “abusing tariffs” and “unilateral bullying.”

In a shift toward a harder stance this month, China retaliated against U.S. tariffs with levies of 125% on imports of American goods. Beijing has also restricted critical minerals exports and put several, mostly smaller, U.S. companies on blacklists that restrict their ability to work with Chinese companies.
Analysts don’t expect the U.S. and China to reach a deal anytime soon, although Trump on Thursday said he expected an agreement could be reached in the next three to four weeks.

Chinese President Xi Jinping last week visited Vietnam, Malaysia and Cambodia in his first overseas trip of 2025. In official Chinese readouts of his meetings with the three countries’ leaders, Xi called for joint efforts to oppose tariffs and “unilateral bullying.”
Since Trump imposed tariffs on China during his first term, the Asian country has increased its trade with Southeast Asia, now China’s largest trading partner on a regional basis. The U.S. remains China’s largest trading partner on a single-country basis.
“For African countries, or every country, it should be everyone cooperating, together responding to the U.S.,” Justin Yifu Lin, dean of the Institute of New Structural Economics at Peking University, told reporters on Monday. That’s according to a CNBC translation of his Mandarin-language response to a question from a reporter from Mali about solutions to the trade war.
More and more voices will likely call the U.S. policy “unreasonable and illogical,” he said. “I’m confident that unreasonable and illogical things can’t last that long.”
While Lin did not rule out the possibility of full decoupling between the U.S. and China, he said he expected the two countries would likely remain linked because of U.S. consumer and business reliance on China.
Last week, China’s Ministry of Commerce replaced its top international trade negotiator with Li Chenggang, who also became a vice minister and has been the country’s ambassador to the World Trade Organization. China has filed a lawsuit against the U.S. with the WTO over Trump’s latest tariff increases.

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