MetLife to Sell Most of Its Bank Depository Business to GE Capital Financial

GE Capital Financial Inc. will acquire most of the depository business of MetLife Inc.'s bank subsidiary.

Under the agreement signed by GE Capital and MetLife Bank N.A., GE Capital will buy about $7.5 billion of the bank's deposits, including certificates of deposit and money market accounts. At Sept. 30, MetLife Bank had $10.7 billion in deposits.

Financial terms of the transaction, which is expected to close in the second quarter of 2012, weren't disclosed.

About $3 billion in custodial deposits associated with MetLife’s traditional mortgage business and certain other deposits are not included in the transaction. John Calagna, a spokesman for MetLife Inc. (NYSE: MET), said GE Capital is buying most of the deposit business and the remaining deposits associated with the traditional mortgage business will be transferred out of MetLife Bank over the next six months.

The agreement "is a significant step toward MetLife's no longer being a bank holding company," said Steven A. Kandarian, president and chief executive officer of MetLife, the largest U.S. life insurer, in a statement.

Recently, the Financial Stability Oversight Council received comments from more than 80 interested parties on a proposed rule that would require supervision and regulation of certain non-bank financial companies under the Dodd-Frank Act. The rule is designed to address how companies would be determined to be systemically important financial institutions. According to FSOC, those determinations would be based on material financial distress at the non-bank financial company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the non-bank financial company could pose a threat to the financial stability of the United States (Best's News Service, Dec. 20, 2011).

During MetLife's third-quarter earnings conference call, Kandarian said the FSOC "is going to be involved in determining whether you're a non-bank SIFI, but the regulation will be by the Fed going forward if you are designated as such… At this point, no one knows exactly who will be designated non-bank SIFI or if you are designated, what the rules will be. I suspect we won't know who's designated until sometime in 2012. …We are discussing this issue at length with people in Washington and we are trying to make sure they understand the importance of a level of regulatory feel for our industry so that they don't simply pluck out a few companies and say you're a non-bank SIFI and everyone else is not" (Best's News Service, Dec. 5, 2011).

In July, MetLife said it was exploring the sale of the depository business of MetLife Bank in order to focus on its insurance operations (Best's News Service, July 21, 2011). About three months later, MetLife said it was exploring the sale of its bank's traditional mortgage-origination business, citing an "uncertain marketplace and regulatory environment" (Best's News Service, Oct. 13, 2011).

In May 2009, MetLife, a federally chartered bank holding company, said it passed the federal government's stress tests for U.S. banks. As one of the 19 U.S. banks with more than $100 billion in total assets at that time, MetLife was the only insurance company that was included in the program (Best's News Service, May 12, 2009).

On the morning of Dec. 27, MetLife Inc.'s stock was trading at $31.32 a share, up 0.71% from the previous close.

Metropolitan Life Insurance Co. currently has a Bes'st Financial Strength Rating of A+ (Superior).

(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)