JPMorgan Chase Bank, N.A - a wing of
JPMorgan Chase & Co.
) - is all set to acquire $70 billion worth of mortgage-servicing
portfolio from MetLife Bank, N.A - a subsidiary of the insurance
). The financial terms of the deal, which is subject to certain
regulatory approvals and other customary closing conditions, were
not disclosed by either of the parties.
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The deal is likely to strengthen and enhance JPMorgan's asset
servicing business by more than 5%. With the completion of this
acquisition, the company will add more than 350,000 clients to
its consumer base. Further, the banking giant anticipates that
low interest rates will allure consumers to take up refinancing
facilities, which will drive the servicing business to the north.
MetLife has been looking out for opportunities to sell its
non-core units in order to focus on the fundamental business,
i.e. its insurance business. In 2011, the company's retail
banking arm (including mortgage servicing) contributed meagerly
to the total earnings. Also, MetLife is willing to do away with
the status of a bank holding company. This will free it from the
Federal Reserve's jurisdiction, which prevented it this year from
hiking dividends and conducting buybacks since it failed the
Ever since then, MetLife is looking out for opportunities to sell
its retail banking business. MetLife has already sold MetLife
Bank's deposit business to GE Capital - the financial services
General Electric Company
). In addition, it sold the bank's warehouse finance business to
EverBank Financial Corp.
), divested the reverse mortgage servicing rights of the same to
Nationstar Mortgage Holdings Inc.
), and closed down further writing of residential mortgages.
As delinquency rates continue to fall, mortgage servicing is
coming out as a lucrative business unlike the situation four
years ago, when majority of the companies were turning away from
it. Therefore, acquiring this portfolio will prove accretive to
JPMorgan's already strong financial performance. The
opportunities in this sector have catapulted the business of
several mortgage servicing companies such as
Ocwen Financial Corp.
), which is on a buying spree for a long time.
JPMorgan retains a Zacks #2 Rank, which translates into a
short-term Buy rating, whereas, MetLife retains a Zacks #3 Rank
(translating into short-term Hold rating).