US banks repay $107b in bailouts

JPMorgan and Goldman Sachs are among 10 of the largest United States banks that have repaid US$68 billion ($107.5 billion) to the US Treasury in a step toward shedding government restrictions on lending and compensation.

JPMorgan, the second-largest US bank by deposits, repaid US$25 billion, while Goldman Sachs and Morgan Stanley each gave back US$10 billion.

All three banks are based in New York. Banks have unveiled plans to raise more than US$100 billion in capital, and financial stocks rose in the past three months on signs the global credit contraction is easing.

"Our strong capital position allowed us to pay back TARP [the Troubled Asset Relief Programme] in a very short amount of time," said Kelly King, chief executive officer of BB&T, the North Carolina-based bank that repaid US$3.1 billion.

"Now we have a singular focus on the business of serving our clients."

American Express, the biggest US credit card company, spent US$3.39 billion to buy back preferred shares under the TARP.

Minneapolis-based US Bancorp refunded US$6.6 billion; Capital One of Virginia repurchased US$3.57 billion; Bank of New York Mellon paid US$3.04 billion; Boston-based State Street returned US$2 billion; and Chicago-based Northern Trust paid back US$1.58 billion.

The Treasury bought preferred stock and demanded warrants - the right to buy common stock at a set price for 10 years - so taxpayers could benefit from any rebound. Typically, the warrants equalled 15 per cent of the TARP capital. JPMorgan, US Bancorp, American Express, BB&T and Northern Trust notified the Treasury of their intent to repurchase the warrants.

JPMorgan and seven other banks may spend about US$3.88 billion this quarter to repay the government, said Rochdale Securities analyst Richard Bove. JPMorgan will incur the highest cost, US$1.48 billion, to repay the TARP, Bove said. Morgan Stanley's cost would be US$1.02 billion. Goldman Sachs said it also made a one-time preferred dividend payment of about US$425 million, which will reduce earnings per share in the second quarter by approximately 77c. Morgan Stanley will have an expense of US$892 million, Bank of New York will record a cost of US$197 million and Northern Trust will have a US$68.6 million expense. JPMorgan paid US$795.1 million in dividends on its preferred stock.

Banks are repaying the TARP almost eight months after then-Treasury Secretary Henry Paulson, seeking to quell market panic that followed the September 15 bankruptcy of Lehman Brothers, provided banks with assistance from the US$700 billion TARP fund passed by Congress.

Bank of America, the biggest US bank by assets, and Citigroup weren't among banks Treasury cleared to repay the TARP. They each accepted US$45 billion in US aid. Wells Fargo, the nation's largest mortgage lender and the recipient of US$25 billion in government aid, wasn't on the list either.

PAYBACK TIME
Bailout funds returned to US Treasury:

* JPMorgan - US$25b
* Goldman Sachs - US$10b
* Morgan Stanley - US$10b
* US Bancorp - US$6.6b
* Capital One - US$3.57b
* American Express - US$3.39b
* BB&T - US$3.1b
* Bank of New York Mellon - US$3.04b
* State Street - US$2b
* Northern Trust - US$1.58b

- BLOOMBERG