The 2 Reasons MetLife Sold Its Bank Unit To GE Capital

Yesterday, MetLife announced that it would sell $7.5 billion in banking deposits to GE Capital. Full press release from MetLife and GE Capital are here and here, respectively.With the sale, MeLlife jumped out of the retail banking industry and GE Capital jumped straight into it. On the face of it, the regulatory path to approval looks straightforward. As the finance arm of an industrial company, GE Capital is allowed to offering a range of commercial retail banking products, with the exception of commercial checking accounts. Since the MetLife deposits it purchases are all retail, GE seems to be in bounds on this point.But what about they larger point: why did this deal happen?It appears to be a case of divergent intentions. MetLife and GE each had solid views on retail banking that cut in opposite directions.1) MetLife wants to shed the increasing regulatory burden of being a bank holding company and selling its retail deposits helps them do that. As Metlife CEO Steven Kandarian said in its press release announcing the deal, "this agreement is a significant step toward MetLife’s no longer being a bank holding company."2) GE has been and continues to be spooked by volatility in short-term wholesale loan markets and wants a more stable funding base. Turbulence in these markets and subsequent loss of investor confidence was what lead GE to offer Warren Buffett very favorable terms for his 2008 preferred stock investment. Acquiring retail deposits will help guard against this vulnerability, GE Capital CEO Dan Henson said. "[It] helps us build a stronger and more efficient funding base, and allows us to better serve our middle market commercial customers."Each side will likely feel like they've accomplished what they set out to: Metlife will move forward getting rid of that pesky bank holding status and GE gets an incrementally more stable funding base.Please follow Clusterstock on Twitter and Facebook.Join the conversation about this story »See Also:Barclays Denies $500mm Loss On Metals TradesAnd Now... For The Grand Total Of How Much Countrywide Has Cost Bank Of AmericaBofA/Countrywide To Pay $335 Million For Predatory Lending Practices Against African American And Latino Borrowers

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