Last week, MetLife Inc. (MET - Analyst Report) agreed to vend its Warehouse Finance business to the financial firm EverBank Financial Corp. While the terms and conditions of the agreement remain undisclosed, the deal is expected to culminate by the first half of this year.
Both the parties have received all the regulatory approvals. Meanwhile, MetLife appointed K&L Gates LLP and Deutsche Bank Securities Inc. of Deutsche Bank AG (DB - Analyst Report) as its advisors. Besides, EverBank took the advice from law firms of Alston & Bird LLP and BuckleySandler LLP along with the investment banking firm of Goldman Sachs Group Inc. (GS - Analyst Report).
The acquisition of MetLife’s Warehouse Finance business is expected to be in line with EverBank’s long-term growth strategy of growing its mortgage business, whereby the acquisition is expected to be accretive to its assets by about $400 million.
Meanwhile, disposing the warehouse finance business will also deeply liberate MetLife from the stringent Federal regulations attached with its bank holding company status. Hence, management has been undertaking this step to re-focus on its core insurance operations. These efforts are expected to be accretive to earnings in the long run.
Accordingly, in early January this year, MetLife packed up its forward residential mortgage business, which originated under MetLife Home Loans. Furthermore, in an attempt to bow out of its banking company status, on December 28, 2011 MetLife had agreed to sell its bank deposits worth $7.5 billion to GE Capital – the financial services unit of General Electric Co. (GE - Analyst Report). The deal is expected to culminate by the end of the first half of 2012, subject to regulatory approvals.
Overall, we believe MetLife should continue to benefit from its diversified business mix as well as its leading brand. The company's capital position remains one of the sturdiest in the industry and is supported by fundamental growth, thereby giving tough competition to its peers such as Prudential Financial Inc. (PRU - Analyst Report) and American International Group Inc. (AIG - Analyst Report). Besides, the ALICO acquisition has already started to contribute to the company’s growth besides inflating the value of investment portfolio.
Although, low interest rate environment along with detrimental performance of MetLife Bank and U.S. auto-home are likely to impact the results in the upcoming quarters, the long-term upside potential remains intact. This opinion is also in line with the Zacks Rank #3, implying a short-term Hold and long-term Neutral recommendation on the stock. Meanwhile, MetLife is scheduled to release its fourth quarter 2011 financial results after the market closes on February 14, 2012.