Sterne Agee Maintains Buy on GE Capital's Acquisition of $7.5B in MetLife Bank Deposits

Sterne Agee has published a research report on General Electric GE after the company finalized its plans to have GE Capital acquire $7.5B of MetLife Bank MET deposits. In the report, Sterne Agee writes, "We do not believe this deal will change anything for GE Capital from a regulatory point of view. Buying deposits will not make GE Capital any more or less regulated. This will not make GE Capital a bank holding company. The biggest benefit for GE Capital is that it takes them further away from a reliance on wholesale funding, especially unsecured bonds and Commercial Paper (CP). In late 2007, GE Capital has over $95B in CP, vs. ~$41B currently, while GE Capital is now ~2% of US bond market issuance vs. 4% in early 2008. GE Capital can now grow mid market lending (currently already a GE Capital business in Retail Finance in the US) at a competitive and diversified cost of funds (3.1% through first 9 months of 2011). GE Capital now owns a bigger business with its own marketing machine in raising deposits, which we believe is a sticky business and improves GE Capital's funding going into 2012 and beyond." Sterne Agee maintains its Buy rating and $22.75 price target on General Electric, which is currently trading down $0.06 from Friday's $18.23 closing price while MetLife trades up $0.36 from Friday's $31.10 closing price.