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Fed Blocks MetLife's Plan to Increase Dividend, Repurchase Stock

Posted on 26 Oct 2011

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MetLife Inc. said Tuesday that the Federal Reserve has blocked its plans to increase its dividend and repurchase stock from shareholders.

The insurance company says it needs approval from the Fed because of its ownership of Metlife Bank, which takes deposits and makes home loans.

The Fed concluded that the company's plans should be tested under the next round of stress tests, scheduled for next year.

It's not the first time the Fed has blocked such an effort. In March, it blocked a dividend increase that Bank of America Corp. had planned. But the Fed has approved increases for JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc.

The decision raises questions over whether MetLife's banking operations are strong enough to withstand another economic downturn.

CEO Steven Kandarian, in a statement, maintained that Metlife is well capitalized, adding "our analysis shows that the company's current capital level and financial strength support capital action increases."

MetLife will seek Fed approval again early next year. It did not detail what dividend level it sought or the size of its intended repurchase program.

The Fed currently requires the 19 largest U.S. banks to submit capital plans each year. In June, the regulator unveiled a proposal to expand that list to the 35 largest banks, those with assets of $50 billion or more.

MetLife said this month that it is trying to sell its banking unit's mortgage business, because it takes resources away from its insurance and employee benefits businesses. Kandarian reiterated that goal Tuesday. The company began writing mortgages in 2008.

In the meantime, MetLife's once-a-year-dividend will stay at 74 cents. It's payable Dec. 14 to shareholders of record as of Nov. 9.