MetLife Inc. (MET), the biggest U.S. life insurer, is exploring the sale of its deposit-gathering business to avoid tighter regulation that comes with bank status.
“We do not believe it is appropriate for the overwhelming majority of our business to be governed by regulations written for banking institutions,” Chief Executive Officer Steven Kandarian said today in a statement.
MetLife is seeking to avoid stronger federal oversight imposed on banks after government bailouts in 2008 prompted Congress to increase regulation through the Dodd-Frank Act. New York-based MetLife, which opted against accepting U.S. Treasury Department capital, said it got about 2 percent of operating earnings from its banking unit in the first quarter.
“This would be positive,” said Randy Binner, an analyst with FBR Capital Markets, who has an “outperform” rating on MetLife. “Previously, the conventional wisdom was that Met was a bank holding company, and it was going to be difficult to change that reality.”
MetLife rose $1.15, or 2.8 percent, to $42.04 at 4:15 p.m. in New York Stock Exchange composite trading. The company has fallen 5.4 percent this year.
MetLife said the business that may be sold includes savings accounts, certificates of deposits and money-market accounts. The insurer plans to continue lending through its residential mortgage business. MetLife Bank began in 2001 and expanded through acquisition in 2008. The unit had total assets of $15.6 billion, including $9.3 billion in deposits as of March 31.
‘Unequal Competitive Grounds’
“This is such a small portion of their business, and yet under Dodd-Frank and various other issues, the tail might wag the dog,” said John Nadel, an analyst at Sterne Agee & Leach Inc., who has a “buy” rating on MetLife. Being regulated as a bank holding company “would put them on very significant unequal competitive grounds against all the companies they compete against day to day.”
MetLife and Prudential Financial Inc. (PRU), the second-biggest life insurer, are pushing federal regulators to refrain from applying bank capital standards to insurance companies. Newark, New Jersey-based Prudential isn’t a bank holding company and, like rivals, including MetLife, has insurance operations regulated by individual U.S. states.
“In a highly competitive global insurance marketplace, it is imperative that MetLife be able to operate on a level playing field with other insurance companies,” Kandarian said.
The Federal Reserve, which regulates bank holding companies, had no comment, said Barbara Hagenbaugh, a spokeswoman. Kandarian wasn’t available for an interview, said Christopher Breslin, a spokesman for MetLife.
MetLife may face scrutiny as a so-called systemically important financial institution, or SIFI, whether or not it retains the banking assets. MetLife and Prudential have said that because of their size they may be labeled SIFIs by federal regulators.
While SIFI designations would subject the companies to tighter standards, the rules may be less strict on MetLife if it isn’t a bank holding company, Binner and Nadel said.
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