E*TRADE (ETFC) Acquires First Republic's Subsidiary Gradifi
Zacks Investment Research | Dec 10, 2019 09:33PM ET
E*TRADE Financial (NASDAQ:ETFC) recently announced that it has acquired Gradifi, a unit of First Republic Bank (NYSE:FRC) that provides student loan benefit. The cash deal was worth nearly $30 million.
The transaction will help E*TRADE to include financial wellness capabilities and student loan solutions in its offerings. Also, Gradifi’s exceptional digital platforms and tools will benefit the acquiring company. Notably, E*TRADE holds a leading position in the stock plan administration space. It serves two million plan participants and more than 800 publicly traded companies.
Scott Whatley, president of E*TRADE Corporate Services, noted "As an industry leader in stock plan administration we play a significant role in helping employers meet the financial needs of their participants, and innovative offerings like Gradifi help us deliver even more firepower to plan sponsors."
With student loan debt becoming a challenging issue in today’s world, First Republic’s efforts to resolve the student loan debt crisis and promote employee financial wellness seem encouraging. Gradifi addresses these challenges by offering financial wellness solutions including employer-sponsored student loan paydown and 529 plan contribution solutions. Further, the unit provides loan counseling, educational resources, access to student loan refinance options and digital financial planning tools.
Despite the success of Gradifi, First Republic decided to divest the unit, believing it to be better suited for a company that specializes in selling corporate benefits. However, First Republic will continue to provide Gradifi’s student loan refinance in the marketplace, repay the subsidiary’s popular student loan and offer college savings benefits to its employees.
Conclusion
E*TRADE remains focused on enhancing customers’ digital experience by providing brokerage products and services on professional trading and mobile platforms. The company’s recent buyout will help boost its technology platform.
Moreover, since 2016, E*TRADE has completed a number of acquisitions in an effort to diversify its business. In 2018, the company had acquired and converted around one million retail brokerage accounts, with $15.4 billion in customer assets from Capital One Financial Corporation (NYSE:COF) .
Shares of this Zacks Rank #3 (Hold) company have rallied 3.4% so far this year, underperforming its Zacks Investment Research
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