FRAMINGHAM (08/18/2000) - New York-based insurer MetLife Inc. announced Friday that it will buy a small New Jersey bank and try to turn it into a nationwide online bank.
As of June 30, Grand Bank N.A. of Kingston, New Jersey, had only US$52 million in deposits -- but it is a nationally chartered bank and could serve as a springboard for MetLife's banking ambitions.
"The idea is that if you have an insurance policy with us, and you want banking services, you could just go to your sales agent," said MetLife spokeswoman Holly Scheffer.
The acquisition still has to be approved by federal banking regulators.
Scheffer said that MetLife plans to enter the retail banking market in 2001 and will keep all of Grand Bank's employees and services, but will rename it MetLife Bank.
The bank will issue checks to customers, who would be able to check balances and transfer funds over the telephone or through the Internet, she said. The 300-plus offices in the U.S. would also serve as mini-branches of the bank to provide in-person service, she said.
MetLife Bank will offer checking accounts, she added, but will not -- at the beginning -- have ATMs or other banking products such as mortgages.
"We're not looking to get into that area," Scheffer said. "But, perhaps down the road we'll look into mortgage partnerships."
It's part of a broader trend, according to analyst George Barto, of the Stamford, Connecticut-based Gartner Group Inc.
Ever since the repeal of the Glass-Steagall Act last fall, which limited the types of financial services companies could offer, banks, insurance companies and brokerages have been feeling their way onto each other's home turfs.
"Single companies are going to start to provide the full range of financial services that customers want, and do it via the Web," said Barto.
However, he added that he expects banks to be more successful at offering insurance products than insurance companies will be at offering banking services.
"Customers don't view insurance companies as being experts at banking," he said. Banks, however, usually offer insurance products through alliances with third parties, not by building their own insurance products. MetLife is building its own branded bank.
Some of this reluctance may be overcome by the fact that MetLife will automatically open bank accounts for insurance customers who receive payments from MetLife, Barto added.
MetLife currently pays out over $25 billion policyholder claims each year.
"Our new bank will help us retain that," Scheffer said.
She added that customers will also be able to choose to receive their money the old fashioned way: by getting a paper check.