Banks repay $68bn in Tarp funds to US Treasury

Ten of the largest US financial institutions that have received public funds under the Troubled Assets Relief Program (Tarp) scheme are to pay back $68 billion after they were approved to reimburse the funds to the federal government yesterday.

The US Treasury confirmed that 10 of the largest US financial institutions participating in the Capital Purchase Program (CPP) portion of the Tarp scheme "have met the requirements for repayment established by the primary federal banking supervisors" and are now eligible to complete the repayment process.

The Treasury did not name the 10 institutions in question, but the individual banks involved announced their participation separately. JP Morgan confirmed it intends to repay the $25 billion preferred stock investment it accepted through the Tarp "in full and with accrued dividends at a closing time determined by the US Treasury".

Morgan Stanley and Goldman Sachs will each repay the $10 billion in Tarp capital they both received in October 2008, while American Express will repurchase $3.39 billion of preferred shares and North-Carolina-based BB&T will pay approximately $3.13 billion to the Treasury to buy back its preferred stock, plus accrued and unpaid dividends. 

Bank of New York Mellon confirmed it has raised $2.9 billion towards the repurchase of $3 billion in Tarp capital and Virginia-based Capital One announced it expects to repurchase the $3.55 billion in preferred shares the company issued to the US Treasury in the coming weeks.

State Street will repay all $2 billion of the preferred shares it issued the government, while Minnesota-based US Bancorp will redeem $6.6 billion of preferred stock and Chicago-based Northern Trust will buy back $1.58 billion in equity from the Treasury.

Major banking institutions excluded from the list of redeeming banks include Citigroup and Bank of America – both of which accepted an initial $25 billion in the first round of Tarp payments. Each have since seen the level of Treasury funding they have required balloon to $45 billion.

Wells Fargo, the other major US institution to receive $25 billion in the October 2008 round of funding, was also excluded. The Treasury's Supervisory Capital Assessment Program stress tests concluded in May that the California-based banking giant required an additional $13.7 billion to increase its capital reserves to protect against a deepening of the recession over the next 18 months.

Returning Tarp funds will allow banks to escape the government restrictions on the hire of non-US nationals and executive compensation imposed on institutions that have accepted public money. In a statement yesterday, JP Morgan acknowledged executive compensation was an ongoing concern for the bank and pledged to "pay employees based on long-term risk-adjusted performance and pay a significant portion of compensation in company stock" while mandating that senior executives retain at least 75% of their equity awards.

Since the CPP was launched in October, more than 600 banks across the US have participated in the scheme, amounting to $199 billion in investments, from the initial $250 billion fund allocated to the programme from the $700 billion Tarp war chest.

This is not the first round of repayments the Treasury has received, however. Between November 2008 and January of this year 20 smaller banks repaid approximately $2 billion, with sums as large as $361 million returned by Minnesota-based TCF Financial down to the relatively meagre $4.9 million repaid by California-based First ULB.

These existing repayments will bring the amount recouped by the Treasury so far to approximately $70 billion, not including the $1.8 billion in dividend payments from preferred stock and warrant holdings it has received from the 10 institutions repaying funds over the past seven months.

Dividend receipts received by all CPP participants are approximately $4.5 billion to date and will be added to the to Treasury's general account to help to reduce US borrowing and national debt.  

Tarp repayments – June 2009

JP Morgan – $25 billion

Morgan Stanley – $10 billion

Goldman Sachs – $10 billion

US Bancorp – $6.6 billion

Capital One – $3.55 billion

American Express – $3.39 billion

BB&T – $3.134 billion

Bank of New York Mellon – $2.9 billion

State Street – $2 billion

Northern Trust – $1.576 billion

 

Tarp repayments – November 2008 to January 2009

TCF Financial – $361 million

Washington Federal – $200 million

First Niagara – $184 million

Sterling Bancshares – $125 million

FirstMerit – $125 million

Signature Bank – $120 million

Old National Bancorp – $100 million

Iberiabank – $90 million

Sun Bancorp – $89 million

Independent Bank – $78 million

Texas Capital Bancshares – $75 million

SCBT Financial – $64 million

Berkshire Hills – $40 million

Bank of Marin – $28 million

Alliance Financial – $27 million

Shore Bancshares – $25 million

Centra Financial Holdings – $15 million

First Manitowoc Bancorp – $12 million

Somerset Hills Bancorp – $7 million

First ULB – $4.9 million

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