Khrom Investments Fund, LP on Capital One Financial

Khrom believes Capital One's acquisition of Discover can transform it from a traditional card issuer into a vertically integrated payments company that owns one of the four major U.S. card networks. By migrating transaction volume onto the Discover network, Capital One can internalize network economics, remove third-party fees and pursue approximately $2.7 billion of annual synergies by 2027. The fund expects Capital One's underwriting, data, technology and funding capabilities to improve Discover while greater network volume broadens merchant acceptance and strengthens the network. Near-term integration spending and tighter underwriting at Discover are obscuring underlying earnings power, but credit performance remains healthy and key network and cost synergies are already appearing. Khrom expects double-digit earnings growth and eventual multiple expansion as integration spending normalizes, noting that the shares traded at about 8 times estimated 2028 earnings versus higher multiples for major peers.