MetLife Inc and General Electric Co have tweaked the terms of a deal in which the U.S. life insurer is selling $7 billion in bank deposits to the conglomerate, a move MetLife said would change the regulator in charge of approving the deal.
The Office of the Comptroller of the Currency will now be responsible for approving the deal, first announced in December, rather than the Federal Deposit Insurance Corp, MetLife said in a filing with the U.S. Securities and Exchange Commission late on Friday.
Under the new structure, GE Capital Retail Bank, rather than GE Capital Bank, will buy MetLife's banking deposits - a move GE's finance arm is making to become less dependent on sales of commercial paper and bonds.
The retail bank is regulated by the Comptroller of the Currency, while GE Capital Bank answers to the FDIC, said GE spokesman Russell Wilkerson.
One brokerage said the delays appeared to be related to the GE side of the deal, and that the change may expedite the process.
"Our understanding has been that the FDIC has been requiring additional information from GE Capital Bank, not from (MetLife), and that this has been holding up the approval process," Sandler O'Neill said in a note on Monday. "The OCC was also involved in the prior review, so we believe that an approval of the sale to a different subsidiary of GE Capital may take less time."
GE's Wilkerson declined to comment on whether the FDIC had been slow to approve the deal. An FDIC spokesman had no immediate comment on whether the change would accelerate the process.
GE'S DEPOSIT SHIFT
Prior to the 2008 financial crisis, GE Capital's strategy was to trade on its parent company's then-"AAA" credit rating to borrow money at low interest rates and then lend it out at higher rates.
However, the giant industrial company lost that top-notch credit rating during the crisis - Standard & Poor's now rates it "AA+" while Moody's Investor Service has an "Aa3" rating on the company - making that a less appealing strategy. GE has also sought to limit its dependence on borrowing. Chief Executive Jeff Immelt said in May the company aims eventually to cut the amount of short-term commercial paper it issues to $25 billion, down from $43 billion at the end of the second quarter and $105 billion in early 2008 before the financial crisis.
Acquiring MetLife's deposits would give GE a "low-cost funding source," said analyst Brian Langenberg of Langenberg & Co.
METLIFE WANTS TO MOVE ON
MetLife is eager to get rid of its banking operations so it can move forward with a plan to raise its dividend and buy back shares, a move the Federal Reserve has thwarted repeatedly.
The Fed blocked MetLife last autumn on the grounds that the company should face stress testing, and then again earlier this year after the company failed those stress tests. Senior MetLife executives argued in response that the Fed should not be using bank metrics to evaluate insurers, but to no avail.
The largest life insurer in the United States has already shut down its mortgage operations, and after selling the deposits business, would be able to surrender its bank holding company charter.
With the bank charter out of the way, analysts expect MetLife to raise its dividend about 49 percent and to buy back around $2 billion in stock.
MetLife's shares rose 1.5 percent to $35.40 in afternoon trading, outpacing the rest of the sector. The stock is up 13.6 percent in 2012, underperforming gains of nearly 16 percent for the S&P insurance industry index.
GE was down 16 cents at $22.37 on the New York Stock Exchange, roughly in line with its peers. Its shares have risen almost 26 percent since the start of the year, more than double the 11 percent rise of the Dow Jones industrial average.
(Reporting By Scott Malone and Ben Berkowitz in Boston, additional reporting by Emily Stephenson in Washington; Editing by Maureen Bavdek)