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U.S. Bancorp to Vend ATM & Debit Servicing Business to Fiserv

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Moving ahead with its strategic moves, recently, U.S. Bancorp (USB - Free Report) initiated the sale of its third-party ATM and Debit Servicing business. The bank has entered a deal with Fiserv, Inc. (FISV) under which the latter will buy the business of the former for around $690 million. Notably, the business to be sold is part of U.S. Bancorp’s Elan Financial Services unit.

Elan Financial Services, a business of Milwaukee's Firstar Corp., acquired U.S. Bancorp in 2000 for about $18.9 billion. The combined entity formed a new bank named U.S. Bancorp and moved on to Minneapolis.

Deal Details

Under the sale agreement, vending of a business line is included, which is a provider and issuer of debit cards and ATM machines to other banks. Particularly, the part of the business, which also operated as Elan ATM and Debit Processing, will be sold.

However, card issuing, corporate payments and merchant-service payment businesses, including Elan Issuing and Elan Corporate Payments, will be retained by U.S. Bancorp and will operate as usual. Notably, providing and issuing of its own debit cards and ATM machines for the bank’s customers will be continued by U.S. Bancorp.

“We believe this sale is the right thing to do for the bank and our customers,” said Tim Welsh, vice chairman, Consumer Banking Sales and Support, U.S. Bank. “Our customers will benefit from the commitment that Fiserv has for this business, and U.S. Bank will benefit as we continue to reinvest in our core businesses,” Welsh further noted.

The afore-mentioned transaction is likely to close in the fourth quarter this year after receiving all necessary approvals. However, the deal will not be material to U.S. Bancorp’s 2018 financial results.

Conclusion

U.S. Bancorp intends to enhance its profitability with focus on core-banking operations. The bank's prospects will also likely get support from its solid business model, core franchise, lower tax rate, rising interest rate and diverse revenue streams.

Several major banks, including Bank of America (BAC - Free Report) , JPMorgan (JPM - Free Report) and Citigroup (C - Free Report) , have been undertaking measures to strengthen core operations and have divested/closed several non-core businesses. These measures significantly boost profitability and enhance shareholders’ value.

U.S. Bancorp has rallied around 7.1% over the past six months as compared with 2.7% growth recorded by the industry.



Currently, U.S. Bancorp carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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