MetLife Inc. (MET), the insurer seeking an exit from banking to limit U.S. oversight, advanced in New York trading after bypassing the Federal Deposit Insurance Corp. in its plan to sell deposits to General Electric Co. (GE)
MetLife, the largest U.S. life insurer, climbed 1.6 percent to $35.42 at 10:20 a.m., the biggest jump in the 81-company Standard and Poor’s 500 Financials Index. The New York-based insurer has climbed about 14 percent this year.
The insurer said Sept. 21 that a deal for Fairfield, Connecticut-based GE to buy about $7 billion in deposits was amended so that the agreement will be subject to approval from the Office of the Comptroller of the Currency, not the FDIC. Chief Executive Officer Steven Kandarian is seeking to depart banking to cut oversight from the Federal Reserve, which has rejected his plans to increase the dividend and buy back shares.
The new arrangement with GE is “an unambiguous positive for Met’s stock,” Eric Berg, an analyst at RBC Capital Markets, wrote in a research note published today. “Investors have been waiting and waiting for the deal to go through.”
Under the revised accord, the deposits would be assumed by GE Capital Retail Bank rather than GE Capital Bank, New York- based MetLife said.
MetLife said in March that it would escape bank status by the end of June. Kandarian later backed away from that assessment, saying he couldn’t read regulators. MetLife had a June 12 deadline to submit a fresh capital plan to the Fed, and the regulator extended the deadline to Sept. 30.
“We expect MET will need to be granted another extension from the Federal Reserve to avoid refiling its stress test,” Sterne Agee & Leach Inc. analysts led by John Nadel said in a note today. “We continue to believe the Federal Reserve has little interest in regulating MET as a bank holding company. Why otherwise would the Fed have granted MET the original refiling extension?”
The Fed said March 13 that MetLife would fall short of U.S. capital standards in a severe economic downturn. MetLife was the only insurer among 19 large financial institutions the Fed evaluated through the so-called stress tests. At the time, MetLife had requested approval for $2 billion in share repurchases and a dividend increase to $1.10.
MetLife has kept its annual dividend at 74 cents a share since 2007 and hasn’t announced a buyback since 2008. Prudential Financial Inc. (PRU), the second-largest U.S. life insurer, increased its payout in 2009, 2010 and 2011. The Newark, New Jersey-based company isn’t subject to the same Fed scrutiny.
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