Chillin' out till it needs to be funded
GE Capital Financial became a new entrant to the Top 100 largest banks in the US when Metlife got out of its banking affiliations, selling the $7.5 bln in bank deposits under its umbrella to GE Capital. Metlife also had an online presence like the Orange brand of ING direct which will go to bolster GE Capital. GE Capital now carries $30 bln in bank deposits, that will help grant capital for its predominantly GE financing fbusiness in leasing and other methods.
GE Capital has been counted a s a bank by the Fed since the Federal Reserve had to save it during the Lehman Crisis and thus GE Capital has been making more moves to get into the traditional banking cap. According to the WSJ, it is the 8th largest US lending business, but its frequent need for short term capital may well require it to stay mindful of the new Basel regulations which limit the amount of such wholesale funding/short term capital in use. As a G-SIFI institution sponsored by the G20 JP Morgan has to pay up a 2.5% capital surcharge for using a inter bank funding model similarily.
GE could have paid a s low as $100 mln for the deal with Metlife, a 1.33% of the deposits GE Capital has also been concentrating on lending to mid sized companies after it lost its top rating in 2008 GE Capital has also been looking to get Federal reserve approval to pay dividends since it came under their aegis in July as a bank. Metlife Bank was also disallowed dividends since October 2011 and the insurer stock celebrated the deal announcement. The deal seems to be very beneficial for GE Capital to continue as a Top 100 bank and also improve its Capital and Deposit / Lending ratios. GE Capital has also had a problem with its Asset Liability Maturity matching that would be set right with these deposits adding to the funding sources, negating the requirement for frequent rollover and churn, in a structurally fragile market eesp as leveraged financing tranches drop off a cliff in 2012 and 2013
Cap One had paid nearly 3% for its $9 bln deposits purchassed from Orange ( ING Direct)