This week, MetLife agreed to sell its online banking operations to General Electric. From Ben Berkowitz and Tanya Agrawal at Reuters:
General Electric Co agreed to buy life insurer MetLife Inc's online bank on Tuesday, in a deal that will let GE's capital arm expand its funding base and lessen reliance on wholesale markets.
The speed of the move took some analysts by surprise, as it has only been three weeks since GE said it wanted to start taking bank deposits from consumers.
Obviously, MetLife Bank customers probably won't feel great about it, considering customers often take a hit on yields and other terms when their bank changes hands.
That may be less of a concern for MetLife customers than it was for ING Direct customers feeling nervous about the online bank's transition to ownership by Capital One. ING Direct has long been a favorite of rate chasers because it consistently keeps top-tier rates. In other words, there's lots of room for rates to fall.
MetLife Bank, on the other hand, was once near the top of Bankrate's MMA rate table, but has fallen down the rankings lately as its insurance giant parent company has been preparing to get out of the banking business, so there's not as much room to fall.
Other than concerns about how new customers of GE's consumer bank will fair, the other interesting point about this story is MetLife's reason for ditching consumer banking:
The country's largest life insurer has been trying since July to sell MetLife Bank, its online retail arm, which was a small part of its overall business but which also led to bank holding company oversight from the Federal Reserve.
In October the Fed blocked the company from paying a dividend or buying back stock.
"This agreement is a significant step toward MetLife's no longer being a bank holding company," said MetLife CEO Steven Kandarian in a statement. Kandarian and others have talked of a "level playing field," where MetLife is regulated as an insurer and not as a bank.
"We feel that once MetLife is no longer a (bank holding company) and subject to Fed oversight, it will remove an important overhang and help 'change the story' for the stock," Bernstein analyst Suneet Kamath said in a note.
It's telling that MetLife is willing to ditch what seems like a fairly cheap and easy way to raise funds in order to get out from under Fed oversight. Being in the banking business has gotten a lot tougher over the last few years with the passage of Dodd-Frank and a tougher stance among bank regulators. In fact, you'll recall ING Group's decision to sell its online banking division came as a result of a deal with European regulators.
Now, in my opinion, if more stringent capital requirements and the Volcker rule prevent another devastating financial crisis from happening in my lifetime, it's 100 percent worth it. But we shouldn't be aware of the consequences of shaking up the industry and, ultimately, making consumer banking a significantly less attractive business to be in.