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Infosys Ups the Ante in Mortgage Servicing With Stater Buyout

Zacks Equity Research

Infosys INFY, in a bid to strengthen its mortgage servicing capabilities in Continental Europe, recently announced that it is entering into a strategic partnership with Amsterdam-based ABN AMRO.

Per the deal, the company will acquire 75% stake in ABN AMRO Group’s mortgage administration services unit Stater N.V. for 127.5 million euros ($143.53 million). The transaction is likely to close in the first quarter of fiscal 2020.

Per Infosys, the mortgage service is a key area for large corporations in the financial sector, given the importance of an asset on a bank’s balance sheet.

What it Means for INFY

Infosys has been consolidating its core competencies by pursuing strategic collaborations and acquisitions.

Notably, Stater is a provider of end-to-end mortgage administration services in the Netherlands, Belgium and Germany. Its expertise in digital origination, servicing and collection are likely to boost customer experience.

Further, Infosys will help Stater with a digital transformation roadmap aided by accelerators like dynamic workflow, application programming interface (API) layers, robotic process automation (RPA) and analytics.

The alliance is expected to reinforce Infosys' position as a leading technology and business process management provider across the mortgage services value chain, improve customer relations, boost operational efficiencies and also assist clients in their digital transformation journey.

Additionally, the company aims to bolster its presence in Europe with this acquisition. Notably, in fiscal 2018, Europe accounted for 23.7% of the company’s total revenues while North America, the largest market for Infosys, represented 60.4%% of the top line.

In comparison to North America, which inched up 2.6% on a sequential basis, Europe rose by 3.8% during the December quarter. Therefore, the company’s focus on diversifying its revenue concentration is prudent in our view.

Infosys Limited Revenue (TTM)

Infosys Limited Revenue (TTM) | Infosys Limited Quote

Zacks Rank and Stocks to Consider

Currently, Infosys has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Computer and Technology sector are Fortinet, Inc. FTNT, eGain Corporation EGAN and Symantec Corporation SYMC, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Fortinet, eGain and Symantec is projected at 16.8%, 30% and 7.9%, respectively.

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