GE, MetLife Seek Okay From New Regulator On Bank Sale
09/21/2012| 07:20pm US/Eastern
--MetLife, GE restructure $7 billion bank deal
--New structure means approval FDIC approval no longer required
--Other key terms of deal remain unchanged
(Adds comments from GE and MetLife representatives in the seventh paragraph.)
By Erik Holm, Leslie Scism and Kate Linebaugh
After waiting months for the Federal Deposit Insurance Corp. to approve their bank deal, MetLife Inc. (>> Metlife Inc) and General Electric Co. (>> General Electric Company) restructured the planned sale and will seek the approval of a different regulator instead.
MetLife, which agreed in December to sell its online banking operation with $7 billion in deposits to GE Capital Bank, said in a regulatory filing late Friday that it had restructured terms of the transaction. MetLife will now sell the business to another GE unit, GE Capital Retail Bank, which means the sale must be approved by the Office of the Comptroller of the Currency.
A GE spokesman said the deal is on track to close before year end. The other key terms of the planned sale remain unchanged, MetLife said.
MetLife has been eager to unload its banking business so it can shed its bank-holding-company status--and the Federal Reserve capital constraints that accompany it. Those restrictions have prevented the insurer from boosting its dividend and buying back shares, as some insurance peers already have done.
The move to amend the GE deal comes after the FDIC failed to take action on GE's application at its monthly meeting on Sept. 11, putting MetLife further behind its originally envisioned June 30 closing date for the bank sale.
People familiar with the matter said that the FDIC had continued to question GE's plans for the unit.
A spokesman for GE said the decision to amend the deal wasn't driven by gridlock in the approval process even though the change removes the FDIC as the primary regulator on the deal.
GE maintains it concluded MetLife's deposit base was more compatible with GE Capital Retail Bank, where GE Capital runs its consumer banking business. That bank has about $20 billion of deposits, mostly brokered CDs.
A MetLife spokesman referred questions about the reasoning to GE.
"Regulated entities make these decisions based on which is the best business unit and the sophistication of the regulator that will be reviewing the transaction," said Lawrence Kaplan, an attorney at Paul Hastings LLP in Washington, D.C.
A person familiar with MetLife said the closing of the deal might stretch into 2013.
A MetLife spokesman said the company wouldn't comment on when the deal would close and didn't have any comment on whether the insurer is seeking an extension of a looming Sept. 30 deadline to file a revised capital plan with the Federal Reserve, or would submit such a capital plan.
MetLife's effort to sell its bank gained urgency in March when it failed the Fed's stress test, forcing the insurer to backtrack on a plan to return capital to shareholders. MetLife had argued the Fed's methodology for those tests was "bank-centric," pointing to state insurance-department examinations that show it as amply capitalized.
The bank represented less than 2% of MetLife's 2011 operating earnings.
Even if MetLife sheds its bank-holding-company status, analysts have predicted that it will be regulated as a nonbank systemically important financial institution under the 2010 Dodd-Frank financial overhaul law. Such oversight likely would be tailored to their particular industries, but could carry restrictions on MetLife's ability to raise its dividend and buy back shares. It is unclear when those regulations, which have yet to be finalized, would go into effect.
MetLife shares jumped 2.5% to $35.75 after hours. GE shares edged marginally higher.
GE had said that it wanted to acquire MetLife's online bank as a way to boost its deposit base by attracting savers over the Internet. Since the financial crisis, GE has sought to reduce its dependence on more volatile sources of funding for the finance arm.
It is unclear what specific questions the FDIC had for GE. Experts said regulators' prolonged scrutiny of the deal may stem from long-standing concerns about risks posed when banks attract substantial deposits outside traditional branch offices, especially if they pay higher interest rates. MetLife's bank primarily operates over the Internet.
In general, the FDIC has always had a concern over deposits that aren't based upon branch networks and are raised over the Internet or through brokers because that money can leave a bank as easily as it entered, experts said.
Representatives from the Fed, OCC and FDIC declined to comment.
-Joann S. Lublin and Alan Zibel contributed to this article.
Write to Erik Holm at firstname.lastname@example.org
Subscribe to WSJ: http://online.wsj.com?mod=djnwires