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December 14, 2012 at 06:36 AM
MetLife has been given approval by federal regulators to sell its bank to GE Capital, a transaction likely to occur early next year.
However, MetLife is not providing any guidance as to when the transaction will occur.
At the same time, MetLife did provide guidance for its 2013 earnings below analysts’ original estimates and added that it expects variable annuity (VA) sales to decline by 40 percent next year, following a 35 percent decline this year.
Sean Dargan, an analyst at Macquarie Capital in New York, calls this a “prudent step in reducing MetLife’s cost of capital.”
Dargan and John Nadel, an analyst at Stern Agee & Leach in New York who first disclosed the news of the approval of the bank sale, agreed that despite the sale, they still expect MetLife to ultimately be designated a systemically significant non-bank (SIFI).
But, that process is likely to take a while. Analysts and others familiar with the SIFI designation process cite the example of American International Group, which was expected to be the first non-bank designated SIFI.
Many expected AIG to be designated as a SIFI at a meeting of the Financial Stability Oversight Council (FSOC) Thursday. It did not happen. The reason for the delay was that the process of designating a bank as a SIFI by the FSOC is complicated and the FSOC and federal staff are moving very deliberately because such a designation is regarded by federal regulators as a “monumental step,” according to someone familiar with the process.
It was the Federal Reserve Board’s concerns about adequate capitalization by MetLife of its guarantees on VAs with living benefits that caused it to fail the Fed’s stress test last year, the beginning of a series of events that led to MetLife’s decision to sell its bank.
The determination that MetLife had not passed its stress test led the Fed to bar the company from increasing its dividend and stock buy backs despite the views of MetLife management that it was adequately capitalized.
The decision by the Office of the Comptroller of the Currency was announced through a securities filing by MetLife.
