MetLife May Sell Depository and Mortgage Biz to Avoid Fed Scrutiny

MetLife (NYSE:MET), the largest life insurer in the U.S., is looking to sell its banking and mortgage operations to limit federal oversight and focus on its core insurance and employee benefits businesses. The company, however, plans to keep its reverse-mortgage businesses. ^[1] MetLife Bank made about $4.4 billion of residential home loans in the first quarter of 2011, accounting for 1.5% of total mortgage originations. Insurance companies are regulated by U.S. states but MetLife is subject to oversight from the Fed because of its banking operations.

We have a price estimate of $36 on MetLife, about the same as the current market price.

See our full analysis of MetLife here

The Federal Reserve rejected MetLife’s request to raise dividends and buyback shares. The Fed is planning to implement next round of stress test on big banks in early 2012 and thus has rejected any requests for raising dividends or share repurchase. The stress test review would included a test of how banks would absorb stresses of a typical recession, such as a decline in value of riskier assets, and an 11% U.S. unemployment rate. ((Fed Nixes MetLife Dividend Increase, WSJ, OCTOBER 26, 2011))

MetLife may thus want to speed up its exit from the banking as it would like to be on a level playing field with insurers that aren’t regulated by the Fed. ^[2]

Understand How a Company’s Products Impact its Stock Price at Trefis

1. MetLife May Sell Mortgage Business to Focus on Insurance, Bloomberg, Oct 13, 2011 [↩]
2. MetLife May Speed Bank Sales as Fed Rejects Dividend Raise, Bloomberg, Oct 27, 2011 [↩]