Chime surges 11% as Stride deal puts fintech on path to bank charter
Chime surges 11% as Stride deal puts fintech on path to bank charter By Manya Saini
Sept 9 (Reuters) - Chime CHYM.O 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.
"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.
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. The company also raised its revenue forecasts for the third quarter and the full-year.
"We view this as a really smart move that further consolidates Chime's 'stack' and creates meaningful growth and cost synergies over time," Evercore ISI analysts wrote in a note.
"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, with the latter being crucial as AI proliferation reduces barriers for product generation and distribution."
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.
(Reporting by Manya Saini in Bengaluru; Editing by Nivedita Bhattacharjee)
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