After a significant delay due to regulatory hurdles, MetLife (
MET
) has completed the sale of its deposit taking business to General
Electric's (
GE
) GE Capital Finance Inc. unit. The deal will involve the transfer
of $6.4 billion in bank deposits to the latter, and has allowed the
insurer to start the process of deregistering as a bank holding
company. MetLife has not disclosed the financial terms of the
deal.
Our
$39 price estimate for MetLife's stock
, implies a premium of 10% to the current market price. Please read
our article:
MetLife 2012 Review: Bank Sale Delay and Asian
Expansion
for a summary of the company's performance in 2012 and future
growth prospects.
See our full analysis of MetLife
How Does This Affect MetLife?
MetLife offered residential mortgage and deposit products
through its banking subsidiary, MetLife bank. The division itself
did not make a significant contribution to Metlife's operations,
accounting for just 5% of the company's revenues and earnings
before taxes (EBT). But as a bank holding company, MetLife was
subject to the Federal Reserve's Comprehensive Capital
Analysis and Review (CCAR). The test was primarily designed for
banks and required them to maintain a minimum total risk-based
capital ratio of 8%, to withstand a hypothetical
stress-scenario.
MetLife failed the test in March 2012, following which the Fed
blocked the company's plans to raise dividends and buy back shares.
Despite the sale of its deposit business, MetLife might still be
subject to strict regulations as it may be qualified as a
systemically important financial institution (
SIFI
). We will keep a close eye on developments and update our model
accordingly.
International Growth
The upside implied by our price estimate is mostly based on
MetLife's plans for expansion in international markets,
particularly in Asia. You can modify the interactive chart below to
gauge the effect a change in MetLife's share of the international
insurance market on our price estimate.
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