U.S. Markets closed

Sallie Mae to Vend Upromise Investments

Zacks Equity Research

SLM Corporation (SLM), also known as Sallie Mae, recently entered into a definite agreement with Ascensus to divest Upromise Investments – its  529 college savings plan administrator. The deal is expected to close in fourth-quarter 2013, subject to regulatory approvals. The financial details have not yet been disclosed.

The divestment does not include Upromise Rewards – Sallie Mae’s college savings program – that entitles members to financial rewards for every purchase. Therefore, the existing members of the program may now opt for 529 college savings plan and contribute their accumulated rewards to the same.

Upromise Investments was acquired by Sallie Mae in 2006. The unit is well known for its expertise in the 529 college savings plans market, with 2.8 million accounts and asset under management of $49 billion.

With this deal, Ascensus, which is the largest U.S.-based independent retirement plan services provider, will venture into a new arena of business and expand its foothold in the college savings plan market. This business diversification will help it provide enhanced services to its customers.

For Sallie Mae, offloading of the savings plan administrator will help streamline its business and focus on core interests. Of late, Sallie Mae has been going through extensive restructuring, following regulatory upheavals in the U.S.

In May 2013, Sallie Mae announced its board of directors’ decision to split the company’s present business into 2 parts. The separation is underway and will likely be closed by second-quarter 2014.

Currently, Sallie Mae carries a Zacks Rank #2 (Buy). Some other financial stocks worth a look include Capital One Financial Corp. (COF), Discover Financial Services (DFS) and Encore Capital Group, Inc. (ECPG). All of these stocks carry the same Zacks Rank as Sallie Mae.

Read the Full Research Report on DFSRead the Full Research Report on SLMRead the Full Research Report on COFRead the Full Research Report on ECPGZacks Investment Research