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Posted by: Dan Beucke on October 25
The Treasury Department continues its behind-the-scenes moves to remake the U.S. banking industry. According to the Associated Press, at least a dozen banks announced Monday they are taking or are applying for funds through Treasury’s bank recapitalization effort, known as the Troubled Asset Relief Program:
—BB&T said it will receive $3.1 billion in return for preferred shares that will pay a 5% annual dividend for five years, and 9% for the next five years unless the government redeems the stock.
—Northern Trust will receive $1.5 billion.
—UCBH Holdings said it received preliminary approval for $298 million.
—City National Bank said it had preliminary approval for an injection of $395 million.
—First Horizon said it is getting $866 million.
—Comerica said it is getting $2.25 billion.
—First Niagra Financial Group said it will receive $186 million, in return for preferred shares and warrants worth 15% of the company.
—Washington Federal, the parent company of Washington Federal Savings, said it will receive $200 million and will issue $200 million in senior preferred shares, with warrants to buy up to $30 million in common stock, to the Treasury.
—State Street said it will receive $2 billion from the sale of stock and warrants to the government.
—SunTrust Banks said it has received preliminary approval for a $3.5 billion investment.
—Capital One Financial, the big credit card company, said it got approval to sell $3.55 billion in preferred stock and warrants to Treasury.
—Fifth Third Bancorp said it has applied for $3.4 billion and expects the application to be approved shortly.
A few of the banks released statements that at least tipped their hat to the idea that some of the money might actually turn into increased loan activity soon. In a prepared statement, Comerica Chairman and CEO Ralph W. Babb Jr. said, according to the AP: "Our participation in the Treasury program provides us added flexibility in continuing to invest in our growth markets. We anticipate this would include making loans to new and existing relationship customers, with the appropriate loan pricing and return hurdles in place to optimize our loan portfolio."
CapOne, on the other hand, is likely to use the investment to acquire another institution, at least in the opinion of Piper Jaffray analyst Robert Napoli: "We view this positively for Capital One as this is cheap capital and suggests the government views Capital One as a survivor," Napoli wrote. "In the near term, we don't expect this to lead to an acceleration in lending, though it certainly positions the company very well from a capital perspective."
This is on top of the banks we reported over the weekend that are getting the following funding:
--PNC Financial Services Group, $7.7 billion, as part of its $5.6 billion purchase of National City. The feds made clear their desire that PNC take over the troubled Cleveland-based bank. After the deal clears, PNC will have the fifth highest deposits of any bank in the U.S.
--Regions Financial, $3.5 billion.
--First Horizon National, $866 million.
--Valley National Bancorp, $330 million.
More banks are likely to make such announcements of the next couple of days. Insurance companies also are making a pitch for funds. And the U.S. car companies aren't far behind, arguing that their auto-finance arms are key to getting the credit system moving again. However, a report in the New York Times indicates Treasury is sticking to pure financial services firms for now.
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