) -- Snoopy's better off sticking with life insurance, rather than playing banker.


(MET) - Get Report

announced on Wednesday that is annual dividend -- payable on Dec. 14 to shareholders of record as of Nov. 9 -- would remain unchanged at 74 cents a share, because the

Federal Reserve

had rejected the life insurer's plan to increase the dividend and resume share buybacks.

The problem is that even though MetLife is primarily an insurer, the company is considered a bank holding company and regulated by the Fed because it holds a relatively small banking subsidiary in MetLife Bank, NA of Morristown, N.J. MetLife had over $771 billion in total assets as of June 30, and the bank subsidiary a paltry $16.5 billion, but that's enough to shackle the company -- and its investors -- with a regulatory ball and chain.

The company is actively trying to sell MetLife Bank's depository business, and announced on Oct. 12 that it was also exploring a sale of the bank's forward mortgage business, as "exiting the depository business and deregistering as a bank holding company also will enable MetLife to operate within the same regulatory framework as other insurance companies. "

MetLife Bank began originating traditonal and reverse mortgages in 2008 which is surprisingly late in the game, considering that the credit crisis peaked that year.

MetLife will report its third-quarter results after the market closes on Thursday, followed with a conference call at 8 a.m. Friday. The consensus among analysts polled by FactSet is for the company to post earnings of $1.06 a share for the third quarter, declining from $1.13 in the second quarter, but rising from 32 cents in the third quarter of 2010.

MetLife passed federal regulators' two previous rounds of stress tests for the largest U.S. bank holding companies and also managed to avoid the stigma of being bailed out through the Troubled Assets Relief Program, or TARP.

But the company will be subject to the Federal Reserve's 2012 Comprehensive Capital Analysis and Review, after which CEO Steven Kandarian looks "forward to seeking and gaining approval" for MetLife's capital plan.

Citigroup analyst Colin Devine -- who rates MetLife a buy, with a $42 price target -- called the Federal Reserve's decision not to allow the company to increase the dividend "a complete surprise," saying that he had "expected the dividend would be raised to $0.90 - $1.00 and a buyback authorization of $1 billion."

Devine added that "it is unlikely that any capital management actions would be approved before" the second quarter of 2012, and "even if MET is able to get rid of its bank," the company may be considered a systemically important financial institution (FISI) per the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law by President Obama in July of last year.

Devine said that his "impression" was that Federal Oversight of MetLife could end "six months post-sale" of MetLife Bank, and that "factoring in at least a 90-day closing period," if a deal to sell the bank is not announced by the end of the first quarter of 2012, MetLife could remain under Fed supervision until 2013, "at which point it could be deemed a SIFI and thus never escape."

MetLife's management has not detailed any alternate plans if it fails to quickly sell MetLife Bank.

FBR Capital Markets analyst Randy Binner, who has an "Outperform," or "Buy" rating on MetLife, said that "investors should take some comfort in MET's continued intention to deploy excess capital," and expressed confidence that the company would manage to avoid SIFI status.

Binner said he had "little doubt that MET will aggressively pursue the sale

of the bank, particularly after today's announcement," and that completing the sale would allow the company to "shed its

bank holding company status, ending formal regulation by the Fed...with the ability to use risk based capital ruled that are appropriate for life insurers."


Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.