JPMorgan to Buy Mortgage Portfolio - Analyst BlogTuesday, November 06, 2012
JPMorgan Chase Bank, N.A – a wing of JPMorgan Chase & Co. (JPM) – is all set to acquire $70 billion worth of mortgage-servicing portfolio from MetLife Bank, N.A – a subsidiary of the insurance giant MetLife, Inc. (MET). The financial terms of the deal, which is subject to certain regulatory approvals and other customary closing conditions, were not disclosed by either of the parties.
The deal is likely to strengthen and enhance JPMorgan’s asset servicing business by more than 5%. With the completion of this acquisition, the company will add more than 350,000 clients to its consumer base. Further, the banking giant anticipates that low interest rates will allure consumers to take up refinancing facilities, which will drive the servicing business to the north.
MetLife has been looking out for opportunities to sell its non-core units in order to focus on the fundamental business, i.e. its insurance business. In 2011, the company’s retail banking arm (including mortgage servicing) contributed meagerly to the total earnings. Also, MetLife is willing to do away with the status of a bank holding company. This will free it from the Federal Reserve’s jurisdiction, which prevented it this year from hiking dividends and conducting buybacks since it failed the stress test.
Ever since then, MetLife is looking out for opportunities to sell its retail banking business. MetLife has already sold MetLife Bank’s deposit business to GE Capital – the financial services unit of General Electric Company (GE). In addition, it sold the bank’s warehouse finance business to EverBank Financial Corp. (EVER), divested the reverse mortgage servicing rights of the same to Nationstar Mortgage Holdings Inc. (NSM), and closed down further writing of residential mortgages.
As delinquency rates continue to fall, mortgage servicing is coming out as a lucrative business unlike the situation four years ago, when majority of the companies were turning away from it. Therefore, acquiring this portfolio will prove accretive to JPMorgan’s already strong financial performance. The opportunities in this sector have catapulted the business of several mortgage servicing companies such as Ocwen Financial Corp. (OCN), which is on a buying spree for a long time.
JPMorgan retains a Zacks #2 Rank, which translates into a short-term Buy rating, whereas, MetLife retains a Zacks #3 Rank (translating into short-term Hold rating).
EVERBANK FIN CP (EVER): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
METLIFE INC (MET): Free Stock Analysis Report
NATIONSTAR MTGE (NSM): Free Stock Analysis Report
OCWEN FINL CORP (OCN): Free Stock Analysis Report
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