JPMorgan to Buy Mortgage Portfolio - Analyst Blog
November 06 2012 - 12:45PM
Zacks
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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