Capital One has spent $344 million on integration costs for its acquisition of Discover, including $110 million in the first quarter, and expects the deal to close next month.

“We received regulatory approval for our acquisition of Discover, and we’re fully mobilized to complete the transaction on May 18,” Chairman and Chief Executive Richard Fairbank said during the bank’s Q1 earnings call on April 22.

The bank’s digital-first strategy will help in the consolidation of the two entities, Fairbank said, adding that “technology investments and efficiency improvement [of the companies] are on a shared path, and modern technology is the engine of sustained revenue growth and digital productivity gains.”

Capital One reported noninterest expense, which includes tech costs, of $5.9 billion, down 3% year over year.

Communications and data processing expenses stood at $399 million, up 14% YoY, according to the bank’s earnings report.

THE BIG PICTURE: Until the acquisition closes, the two entities are separate public companies, but Cap One has limited access to Discover’s information, Fairbank said. “Based on our due diligence and integration planning, we continue to expect that we will achieve the synergies we estimated when we announced the deal enabled by the integration costs we estimated at the announcement.”

When the deal was announced in February 2024, Cap One said the acquisition would generate $2.7 billion worth of extra revenue by 2027, and integration costs were anticipated to be around $2.8 billion.

Cap One spent $234 million on integration costs in 2024, according to its Q4 2024 earnings report. And it spent $110 million on integration costs during Q1, according to the earnings report. So far, the $487 billion bank has spent more than 12% of its estimated integration costs.

BY THE NUMBERS: In Q1, Cap One also reported:

Revenue of $10 billion, down 2% YoY;

Net income of $1.4 billion, up 10% YoY; and

Interest income of $11.4 billion, up 2% YoY.

NOTEWORTHY: The merger of two financial institutions usually leads to a much more efficient organization, Gunnar Millier, senior manager of advisory services, mergers, acquisitions and divestitures at Deloitte, told Bank Automation News.

“As financial institutions scale, their efficiency ratio becomes better,” Millier said. “Banks have many fixed costs like regulatory and compliance, which remain constant as organizations scale, but their revenues get bigger.”

For Q1, Capital One reported an efficiency ratio of 59%, compared with 54% in Q1 2024.

In 2023 and 2024, Capital One “witnessed quite a big improvement in the efficiency ratio,” Fairbank said. The bank will see more efficiency gains as the two entities continue merging, he added.

MARKET REACTION: Shares of Capital One (NYSE: COF) were up/down 3.46% from market open to $176 as of market close today. Cap One has a market capitalization of $67 billion.

Discover had a market cap $44 billion as of today and its stock is closed at $178, up 3%, during today’s trading session. The company’s stock has jumped 37% YoY.