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MetLife on Bank Regs: Enough is Enough

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MetLife Inc. says it is giving up on the idea of trying to continue offering banking services in the current regulatory environment.

MetLife, New York, (NYSE:MET) plans to continue to offer residential mortgages through its MetLife Home Loans business, but it is exploring the possibility of selling the depository business of its MetLife Bank N.A. unit.

The unit provides savings accounts, certificates of deposit and money market accounts.

MetLife Bank ended the first quarter with about $16 billion in assets and $9.3 billion in deposits, but the company’s focus is on insurance and employee benefits, and a bank holding company structure is no longer appropriate, the company says.

MetLife Bank began offering retail savings products through the Internet in 2001, and it started a MetLife Home Loans division in 2008.

In June 2008, the bank acquired EverBank Reverse Mortgage L.L.C., Bloomfield, N.J., and the residential mortgage origination and servicing business of First Horizon National Corp., Memphis, Tenn.

Although MetLife performed well during the recent financial crisis and did not need to accept help from the U.S. Treasury Department’s Capital Purchase Program, it has been one of the companies getting extra investor attention as federal financial services regulators implement the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Dodd-Frank drafters tried to prevent future financial crises by giving financial services regulators the authority to impose new layers of regulatory scrutiny on financial institutions that appear to be especially important to the stability of the U.S. financial system. Federal regulators have some ability to impose new requirements on giant insurers but much more authority to impose new requirements on banks.

“MetLife Bank represented just 2% of MetLife Inc.’s first quarter 2011 operating earnings, and we do not believe it is appropriate for the overwhelming majority of our business to be governed by regulations written for banking institutions,” MetLife President Steven Kandarian says in a statement. “In a highly competitive global insurance marketplace, it is imperative that MetLife be able to operate on a level playing field with other insurance companies.”

Securities analysts in the New York office of Sterne Agee, Birmingham, Ala., say today in a comment that the MetLife announcement is consistent with what they have been writing about the company for several months.

“We believe it’s likely that MET will be deemed a systemically important financial institution or SIFI,” the analysts say. “The key, however, is that as the only insurance company in the U.S. that is structured as a Bank Holding Company, MET could be placed on unequal ground versus other insurers if its SIFI requirements are similar to, or the same as, those being contemplated for the large multi-national banks.”

The sale of the depository should have little effect on earnings per share or return on equity, and it should help shareholders by increasing the likelihood that MetLife will be classified as a non-bank SIFI, rather than a bank SIFI, the analysts say.

Analysts are expecting the capital requirements that apply to insurer SIFIs to be lighter than the requirements that apply to bank SIFIs.

Other MetLife Bank coverage from National Underwriter Life & Health: