In Support of the GE/MetLife Deposit Acquisition (GE, MET, COF, ING)
General Electric Co. (NYSE: GE) is in the news with an acquisition of depository assets from MetLife, Inc. (NYSE: MET) which some may fear is taking it back to being more and more dependent upon its finance operations to juice…
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General Electric Co. (NYSE: GE) is in the news with an acquisition of depository assets from MetLife, Inc. (NYSE: MET) which some may fear is taking it back to being more and more dependent upon its finance operations to juice up earnings. Stern Agee’s Ben Elias is reiterating a “Buy” rating on GE along with a target price of $22.75 for the conglomerate.
The report calls GE’s move as taking GE Capital halfway home on alternative funding as it is acquiring some $7.5 billion in MetLife Bank deposits. GE Capital recently noted that it was planning to increase the alternative funding at GE Capital by $15 billion to about $80 billion and this deal gets the conglomerate’s capital unit halfway there. Elias also noted that he believes GE’s price paid was at the low-end of the multiple from when Capital One Financial (NYSE: COF) acquired the ING U.S. deposits from ING Groep NV (NYSE: ING).
The good news in the report: “We do not believe this deal will change anything for GE Capital from a regulatory point of view. Buying deposits will not make GE Capital any more or less regulated. This will not make GE Capital a bank holding company. The biggest benefit for GE Capital is that it takes them further away from a reliance on wholesale funding, especially unsecured bonds and Commercial Paper.”
GE Capital had over $95 billion in commercial paper in late-2007 versus about $41 billion today. GE Capital is now only about 2% of the whole U.S. bond market issuance, down from about 4% as recently as 2008. Elias’ note goes on to say that GE Capital can now grow mid market lending at a competitive and diversified cost of funds with a sticky business that improves GE Capital’s funding going into 2012 and beyond.
JON C. OGG
Contact [email protected] for any questions or corrections.
Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.
