CHICAGO, March 18, 2011 /PRNewswire/ -- Zacks.com Analyst
Blog features: Fifth Third Bancorp. (Nasdaq: FITB),
Lakeland Bancorp Inc. (Nasdaq: LBAI), National Penn
Bancshares Inc. (Nasdaq: NPBC), Bridge Capital Holdings
(Nasdaq: BBNK) and American International Group (NYSE:
AIG).
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Here are highlights from Thursday's Analyst Blog:
TARP Close to Break-Even
The Treasury Department reported on Wednesday that six more
banks repaid a total of $475 million
in funds they had received as part of their participation in the
$700 billion Troubled Asset Relief
Program (TARP). The reimbursement lifted the recovery under the
program to about 99%. The program was initiated more than two years
ago to rescue the nation's financial industry.
There is more good news for the Treasury. In addition to the
recovery of the entire TARP money, the Treasury expects the program
to earn a handsome $20 billion in
profit from banks.
So the government's highly criticized bailout program has
finally been able to silence quite a few of its detractors.
The program has been effective in easing the pressure on credit and
capital markets. It was also instrumental in restoring confidence
in the financial system to a great extent.
Banks That Repaid
- Cincinnati-based Fifth
Third Bancorp. (Nasdaq: FITB) paid $280
million to repurchase warrants issued to the U.S. government
that would allow it to purchase more than 43.6 million shares at
$11.72 a share on some future date.
The company also fully repaid its $3.4
billion to repurchase preferred stock held by
theTreasury.
- Oak Ridge-based Lakeland
Bancorp Inc. (Nasdaq: LBAI) paid back $20 million of bailout money. It also paid
$86,111 in preferred dividends.
Still, $19 million TARP money remains
due for the bank.
- Boyertown-based National
Penn Bancshares Inc. (Nasdaq: NPBC) repaid $150 million of bailout money and paid dividends
of $645,833.
- Rapid City-based Stockmens Financial Corp. repaid its remaining
$11.6 million TARP fund. The company
also paid $49,807 in dividends.
- Norfolk-based Heritage Bancshares repaid $2.6 million of its TARP money. The company also
paid $11,220 in dividends.
- San Jose-based Bridge
Capital Holdings (Nasdaq: BBNK) repaid $8.9 million in bailout money and paid dividends
of $38,164.
Overall, taxpayers have recovered about $244 billion of the $245
billion in TARP funds that were handed out to banks. This
recovery includes dividends and interest income from banks.
More Cost Efficiency Expected
Another major success of TARP is its lower-than-expected cost to
taxpayers. The estimate of its overall cost has been decreasing
consistently.
According to the Congressional Budget Office's (CBO) estimate,
the cost related to TARP will drop to $25
billion from its previous estimate of $66 billion in August
2010. The present estimate by CBO is a quantum drop from the
Treasury's initial estimate of $350
billion.
What's Costly?
The assistance to American International Group (NYSE:
AIG), support to automakers and efforts to prevent foreclosures
remain on the costs side of the ledger. Together, these actions are
expected to leave a $45 billion dent
in the program. However, a net gain of $20
billion is expected from other transactions.
The Treasury now owns 92% of AIG and expects to sell some of its
holdings, pulling the total cost of TARP further down.
Better Results Ahead?
The final success of TARP is probably still to be seen. While
most of the major financial institutions have cleared their TARP
dues, many banks are still to repay their bailout loans.
Though a major chunk of the remaining TARP fund will likely get
consumed in the Home Affordable Modification Program, the Treasury
is in the process of recovering as much as it can. As a result,
there is high possibility of further profits and cost reductions in
future, raising hopes for more success.
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