Sept 9 (Reuters) - Chime shares climbed 7% in morning trading 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.
THE BANK CHARTER RACE
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. The fintech firm on Tuesday also raised its third-quarter and full-year forecasts for revenue and adjusted EBITDA growth.
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.
The company said it will consolidate its banking activities under Stride after the deal closes, expected in the first half of 2027. Shares of The Bancorp, Chime's other banking services partner, were down 18% on the news of the deal.
"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.
Chime estimates the deal to generate over $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.
(Reporting by Manya Saini in Bengaluru; Editing by Nivedita Bhattacharjee, Joyjeet Das and Leroy Leo)
