Chime surges 11% as Stride deal puts fintech on path to bank charter
CHYM•Chime rises after $590 million Stride deal
Sept. 9 (Reuters) - Chime shares surged 11% 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 deal would take that challenge further, giving Chime a bank charter and more control over its operations as it expands into products and services long dominated by traditional lenders.
Chime sees more than $100 million in synergies
Chime shares have surged about 28.4% so far this year through Tuesday's close, giving it a market value of about $12.23 billion.
The company expects the deal to generate more than $100 million in net synergies, driven by lower sponsor bank fees, expanded lending products and a significantly lower cost of funds.
"The acquisition will support faster product innovation, increased member trust, a structural cost advantage, and greater control," Wolfe Research analysts wrote in a note.
Analysts say the deal speeds up charter path and boosts economics
"Acquiring an existing bank provides Chime a faster and more proven path to securing a national charter," analysts at J.P. Morgan wrote in a note. Stride is a nationally-chartered bank that has been Chime's bank partner for more than seven years.
