It's usually a slow week in the financial sector between Christmas and New Years, but today GE Capital made a few waves by announcing that it was buying MetLife Bank. MetLife Bank, which consists of approximately $7.5 billion in U.S. deposits, is the onilne banking arm of the insurer MetLife. In the past, the bank has offered attractive rates on savings and especially CDs.
Its current 1.00% APY 12-month CD is competitive but not near the top of the best CD rates according to the BestCashCow rate tables.
It has been known for some time that MetLife wanted to divest the bank. Having a banking division opened MetLife to scrutiny from the Federal Reserve. Recently, the Fed blocked MetLife's attempt to raise its dividend or buy back shares.
For General Electric, the move represents an attempt by the company to diversity its sources of funding for its financial services group. During the financial crisis in 2008, GE Capital faces severe pressure, with many thinking it might collapse, because of the seizing up of the commercial paper markets. Consumer deposits are a much more stable source of funds during a crisis.
In a statement announcing the acquisition, GE wrote:
“This acquisition fits with our plans to launch a U.S. deposit platform,” Dan Henson, president and CEO of GE Capital - Americas, said. “It accelerates our timing, helps us build a stronger and more cost efficient funding base, and allows us to better serve our middle market commercial customers.
“These new capabilities combined with the GE Capital brand and our financial services marketing expertise provide an excellent engine for future growth,” Henson said. “And since we will be using the same service and support platforms, the customer transition will be seamless and the quality experience consistent.”
So, customers of MetLife should not experience any major change of service and at this point we assume GE will continue to honor all CDs and other accounts opened under MetLife.
The acquisition is expected to close mid-2012 although MetLife customers can expect to receive information well before that.
Let's hope that GE makes some waves in the banking space by offering attractive rates and high quality service.