Fed Action on MetLife Sends Stock Soaring

After the 8k was filed with the Securities and Exchange Commission and MetLife issued a statement, MetLife stock was trading around 1:30 p.m. at $30.91, up $1.49 or 5.06 percent.

In the Sterne Agee investment note, the investor concern also deals with the fact that the FDIC decided not to deal with the sale issue at its June meeting.

In his note, Nadel said that the likelihood that the Federal Reserve Board, knowing the bank sale is pending, would require MetLife to raise dilutive capital to meet the minimum risk-based capital and leverage hurdles, is an extremely low probability outcome."

Nadel explained that the core investor concern is based on a fear that the Federal Reserve Board doesn't grant MetLife approval to avoid resubmitting, in which case it appears highly likely MetLife's resubmission would again fail since even excluding the capital deployment plans, MetLife's risk-based capital and leverage ratios both missed the minimum hurdles in March.

In the note, Nadel explained that the largest shortfall in MetLife's recent stress test was in the risk-based capital ratio (RBC), which came in at 6% vs. minimum 8%.

This was because of MetLife's low level of Tier 2 capital compared to its bank peers, not from higher risk, Nadel said.

As to the approval of the sale of the bank to GE Capital, "We remain hopeful the sale will show up on the agenda for the FDIC's July meeting, though that agenda won't likely be set for at least a few more weeks."