General Electric Co. jumped into the retail deposits business on Tuesday, buying the online bank from life insurer MetLife Inc. in a deal that will let GE’s capital arm expand its funding base and lessen reliance on wholesale markets.
MetLife has been trying for months 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.
For GE Capital, the deal brings access to a retail deposit base, which the conglomerate’s finance arm needed to broaden its funding. Earlier this month it said it intended to go after retail deposits next year.
“We’ve got it in other parts of the world. We haven’t done it in this country. We’re going to do that very soon, just to give us more diversification in terms of how we fund the business,” GE Capital Chief Executive Mike Neal said at an investor conference.
MetLife shares were up 0.8 percent at $31.35 and GE shares dipped 0.5 percent to $18.13 at midmorning on Tuesday.
GE Capital is taking on about $7.5 billion in deposits — just enough to put it in the top 100 banks nationwide, roughly.
The addition of the retail channel is part of the finance business’ recovery from the financial crisis, when it ran into sufficient trouble that GE had to grab a financial lifeline from investor Warren Buffett.
For MetLife, the sale caps a process that started in July.
In late October, during a presentation to analysts, the company was coy about the bank sale, saying only that it was in progress and that a sale was more likely than an outright shutdown.
“This agreement is a significant step toward MetLife’s no longer being a bank holding company,” said MetLife CEO Steven Kandarian in a statement.
Financial terms of the deal, which is expected to close in mid-2012, were not disclosed. Deutsche Bank was financial adviser to MetLife and Wachtell, Lipton, Rosen & Katz was legal adviser.
(Reporting By Ben Berkowitz in New York, with Tanya Agrawal in Bangalore; editing by Anil D’Silva and Matthew Lewis)