By Agency Reporter

Thursday, 10 Feb 2011

NEW YORK: Allstate Corporation, the largest publicly traded United States home and auto insurer, is exiting the banking business and will sell about $1.1bn in deposits to Discover Financial Services as regulators increase scrutiny of the industry, Bloomberg reported on Wednesday.

Discover will provide savings accounts, certificates of deposit and money-market products to Allstate customers, the Northbrook, Illinois-based insurer said on Wednesday in a statement.

Allstate, regulated by state insurance commissioners, has been subject to additional oversight by the Office of Thrift Supervision because of its banking business. The Fed will be taking greater authority over the financial industry after the passage of the Dodd-Frank Act last year.

Allstate Chief Executive Officer Thomas Wilson met in October with representatives of the Federal Reserve Bank of Chicago for a discussion on changes in regulation. Wilson has focused the Allstate Financial unit on life insurance and retirement and investment products.

“That, combined with the changing regulatory environment, led us to the determination that operating Allstate Bank is no longer core to our long-term strategy,” said Matthew Winter, CEO of Allstate Financial, in the statement.

Discover climbed by 34 cents to $21.47 on Wednesday in regular New York Stock Exchange trading, its highest since October 12, 2007. It has gained 68 per cent in the past year. Allstate rose by 68 cents to $32.56, its highest in more than three months.

Discover CEO David Nelms is using acquisitions to diversify revenue and augment the credit-card business. Last month, the firm purchased Student Loan Corporation from Citigroup Incorporated.

 

Source: Punch