Chase Manhattan's decision to acquire the mortgage assets of Advanta was not based on technology, an industry analyst said.
Although Advanta boasted in a press release of "state-of-the-art warehousing and statistical modeling tools that identify potential customers and new target markets," IT probably played a minor role in the acquisition, according to Todd Pitsinger, an analyst with Friedman Billings Ramsey & Co. "I wouldn't imagine Chase is going to use Advanta's systems."
Neither Chase nor Advanta were available for comment.
The move does signal Chase's intent to play on the national stage.
"Chase hadn't been one of the top ten issuers in the U.S.," Pitsinger said. "In order to compete versus those issuers, like a Citicorp or a Household, Chase certainly needed to build its scale." Citicorp recently acquired subprime lender Associates First Capital for $31.1 billion.
In January, Chase Manhattan Mortgage, a subsidiary of J.P. Morgan Chase, announced plans to acquire Philadelphia-based Advanta's mortgage division, which has annual origination capability in excess of $1 billion and a 200,000-customer, $15.8 billion servicing and subservicing portfolio of subprime mortgage loans.
Advanta will receive an undisclosed cash amount in excess of the book value of the assets. A research report by Friedman Billings Ramsey & Co. estimates the purchase premium to be between $20 million and $40 million. The deal is expected to close in the first quarter of 2001.
Advanta's mortgage division, with 1,800 of the company's 2,700 total employees, has a national retail and wholesale presence with call centers in San Diego and suburban Philadelphia.
Advanta now plans to focus on its credit card division, which posted net income of $22.8 million in 1999 by issuing MasterCard-branded unsecured credit to small businesses.