Chime shares jump 10% as Stride deal puts fintech on path to bank charter

Sept. 9 (Reuters) - Chime CHYM.O shares surged 10% before the bell on Wednesday after the fintech firm agreed to buy Stride for $590 million, gaining a bank charter that would allow it to expand its lending business.

Over the past few years, Chime has emerged as a major challenger to traditional banking heavyweights, chipping away at their market share with app-based, low-cost financial services.

The Stride Bank deal, announced late on Tuesday, would take that challenge further, giving Chime more control over operations as it forays into products and services dominated by traditional lenders.

Wall Street analysts cheered the deal, with Piper Sandler saying it would improve Chime's unit economics while giving it greater control over product development.

"We see this as a bold move with the potential to accelerate Chime's market share," analysts at William Blair wrote in a note.

On Tuesday, Chime also raised its third-quarter and full-year forecasts for revenue and core profit growth.

A growing number of fintechs, neobanks and digital-asset firms are seeking bank charters as they look to expand their role in the financial system.

Stride, a nationally chartered bank, has been Chime's partner for over seven years.

Chime expects to keep its assets below $10 billion for the foreseeable future. Analysts see the threshold as key as it keeps it "Durbin-exempt," meaning Chime is not subject to the debit-card fee caps imposed on banks under the 2010 Durbin amendment.

"Becoming a full-fledged bank should allow Chime to capture a higher share of wallet with customers, increasing its direct depositor base and solidifying the moat around its platform," Evercore ISI analysts wrote.