MetLife, Inc. (MET) and SunTrust Banks, Inc. (STI) entered into an agreement whereby SunTrust would fund commercial real estate mortgages originated and managed by MetLife Real Estate Investors. The agreement between MetLife and SunTrust is designed for a 3-year period.
Moreover, under the terms of the agreement, SunTrust would invest up to $5 billion for these loans.
In Oct 2012, MetLife launched a third-party asset management business in order to capitalize on its expertise in private asset sectors comprising real estate equity, commercial mortgages and private placement debt. Moreover, the business focuses on the creation of investment opportunities which would help generate attractive and long-term returns for its institutional investors that consists of insurance companies, public and private pension plans and sovereign wealth funds.
In recent months, the economic recovery drove the demand for U.S. commercial real estate. This resulted in investors preferring higher yields from properties over U.S. Treasuries, which provides fixed income. This resulted in SunTrust entering into the strategic alliance with MetLife in order to provide its clients with top-quality investments with attractive returns.
As of Dec 2012, commercial mortgages comprised about 75% of total mortgages held as investment by MetLife. Moreover, the largest percentage of these commercial mortgages was concentrated in the South Atlantic states.
The strategic alliance between SunTrust and MetLife is expected to diversify the loan portfolios of both the companies since SunTrust would consider loans from all regions that would be invested in mortgages for properties on the U.S. East Coast. This, in turn, will reduce the concentration risk.
Currently, MetLife carries a Zacks Rank #2 (Buy) while SunTrust carries a Zacks Rank #3 (Hold). Other stocks that are worth considering in the financial sector include Enterprise Financial Services Corp. (EFSC) and First Interstate Bancsystem Inc. (FIBK) with a Zacks Rank #1 (Strong Buy).
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