Recently, MetLife Bank N.A. – the banking arm of MetLife Inc. (MET) completed the long overdue sale of its deposit business to GE Capital Retail Bank, FSB. The latter is a subsidiary of GE Capital – the financial services unit of General Electric Co. (GE).
The sale was completed following the approval of the Office of the Comptroller of the Currency (OCC), which was received in December last year. Consequently, the bank deposits of MetLife Bank, which amounted to about $6.4 billion, have been transferred to GE Capital Retail Bank.
MetLife initially had a deal with GE Capital Bank to sell its bank deposits, as announced in December 2011. However, complications in achieving regulatory approvals from Federal Deposit Insurance Corp. (FDIC) postponed the closure of the deal from the target of the first half of 2012. Hence, the deal was amended and simplified in September 2012, changing the buyer to GE Capital Retail Bank.
The fact that GE Capital Retail Bank comes under the regulatory purview of the OCC, significantly cleared the regulatory snags for the successful completion of the deal. Hence, the companies no longer required the approval of FDIC, leading to the swift closure of the long overdue deal.
The sale was a part of MetLife’s efforts to exit the retail banking business to focus on its core insurance and employee benefits businesses. The company is primarily an insurance company and the banking unit contributes a small fraction of its operating earnings. Yet, MetLife’s classification as a bank holding company impels it to abide by all the strict rules and capital requirements imposed on banks, including those imposed under the Dodd-Frank Act.
Thus, in order to avoid these stringent Federal regulations, MetLife intends to de-register as a bank holding company and has already taken certain administrative steps for the same. Management believes that the strict regulations on bank holding companies are adversely affecting MetLife’s non-banking businesses and putting it at a competitive disadvantage.
MetLife currently carries a Zacks Rank #5 (Strong Sell), while General Electric carries a Zacks Rank #3 (Hold).
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