MetLife Inc. received a three-month extension from the U.S. Federal Reserve on its plans to return capital to shareholders, the company said on Tuesday, potentially removing a short-term overhang on its stock.
Its shares were up 5.4 percent on Tuesday afternoon, leading the sector.
MetLife, which has been blocked from raising its dividend or buying back shares twice in the last eight months, said in a regulatory filing the Fed gave it an extension to Sept. 30 from June 12.
After failing a Fed stress test in March, MetLife had been on the hook to submit a new version of its capital plan by this month. Those March tests, which covered 19 banks, considered whether companies would have enough capital if unemployment spiked again and housing prices took another plunge.
Analysts have said MetLife was likely to fail another stress test even with a new capital plan, given that the tests were designed for banks and not insurers. That raised fears the Fed could force it to boost its capital ratios by raising money or retaining earnings.
A Sterne Agee analyst said last week the company was “in limbo” waiting on a Fed decision.
MetLife is unique among big insurers in being regulated by the Fed because of its bank holding company charter. The company is trying to shed the charter, having struck a deal to sell its online deposit-taking operations to General Electric Co.
Some believe with the charter out of the way, MetLife could avoid further Fed stress testing, freeing it to return billions of dollars to investors.
Of the four banks that failed the stress tests in March, only MetLife has needed extra time to resubmit its capital plan.
Two weeks ago, Citigroup Inc. said it would not ask again this year for permission to raise its dividend or buy back shares. Regional bank Sun Trust Banks Inc and auto lender Ally Financial filed their plans last week, representatives of the banks told Reuters on Tuesday.
SunTrust declined to provide details about its plan. Ally noted that it has announced actions designed to improve its capital and liquidity positions, such as a bankruptcy filing for its Residential Capital mortgage unit and a plan to sell its international operations.
Ally is 74 percent-owned by the U.S. Treasury after a series of government bailouts during the financial crisis.
MetLife shares were up 5.4 percent at $31.00 on Tuesday afternoon on the New York Stock Exchange. Between March 13, when it failed the last stress test, and Monday’s close, MetLife shares were down 25 percent, against a decline of 5 percent for the sector.