MetLife has reset the clock on its hoped-for bank sale. (AP Photo/Mark Lennihan, file)
Metropolitan Life Insurance Company (NYSE: MET) has restructured its bank sale deal with GE, so that it will no longer have to fight for approval of the sale from the FDIC, but instead hope for the warmer embrace from another—in this case, the Office of the Comptroller of the Currency (OCC).
According to an analyst comment, which favored the switch, the change will be positive toward getting the deal approved but that the timing would likely come in 2013, not by year’s end, as MetLife has hoped with the FDIC.
MetLife announced last winter the planned sale of $7.5 billion in retail banking deposits to GE Capital. The company noted at the time it also intended to transfer the remaining $3 billion in other deposits out of MetLife Bank over the next six months.
“From MetLife’s perspective, the new arrangement does not impact the key terms of the agreement and still enables MetLife, Inc. to ultimately deregister as a bank holding company following completion of the deal,” said a spokesman for MetLife.
Although MetLife wasn’t commenting on its pre-stated plans to refile its stress test before the Sept. 30 deadline, the analyst from Stern Agee, John Nadel, wrote that he expects the New York insurer with the increasingly global portfolio will need to be granted another extension from the Federal Reserve to avoid refiling its stress test, but added that Met may still have to submit a stress test anew to the Fed as a Bank Holding company for the 2013 process.
In June, the Federal Reserve Board gave MetLife until the end of September to resubmit a capital plan after a previous one had failed a stress test.
Investors are, of course, looking at whether the company will increase dividends and buy back shares once the bank is sold and it shakes the Federal Reserve oversight. But, as Nadel noted, “most investors (us included) expect Met will be designated a non-bank SIFI (systemically important financial institution) once it is formally no longer a BHC, at which point the company would again be regulated by the Federal Reserve, but under prudential standards [not as a BHC] which have yet to be detailed.”
The regulatory varietal group determining nonbank SIFIs, the Financial Stability Oversight Council (FSOC) is meeting this Friday, Sept. 28, in closed session at the Treasury.
The FSOC looks at the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the nonbank financial company, to see whether it could pose a threat to the financial stability of the United States. About 50 nonbank SIFIs have been identified by the Council—none are public, and a final decision is not expected until the first quarter of next year.
However, given the uncertainty of both the timing of FSOC-driven Fed regulatory oversight, as well as the unknown metrics which will be applied to measure capital of an insurance company under the Fed’s domain, analysts were sour on the likelihood that MetLife management would take any material action on the capital front.
“Based on recent meetings, we believe management will remain somewhat patient until it's clear what the capital requirements will be assuming the company is designated a non-bank SIFI post the sale of its bank,” Nadel stated.
In a letter dated May 21 and addressed to the Securities and Exchange Commission, Matthew M. Ricciardi, chief counsel for MetLife Group, Inc., had written that no events had arisen that would interfere with the closing of the deal, which the company had said would occur four to six months after it was originally announced late last year. MetLife further noted it was awaiting regulatory approvals.
