Wells Fargo & Co. (WFC) and Citigroup, Inc. (C) both repaid the government aid they received under the Trouble Asset Resolution Program (TARP).
Although expected, it wasn’t a foregone conclusion that Wells Fargo and Citigroup would repay their TARP funds by Christmas. Bank of America Corp. surprised investors by announcing plans to repay $45 billion in TARP aid earlier this month. Citigroup had been eager to return the funds, but wrestled with regulators about the terms. It announced its repayment plans on Dec. 14, and Wells Fargo followed later the same day.
The rush to repay signals that banks once more have access to private capital. But it also reflects bankers’ resistance to government influence, particularly the restrictions being imposed on executive pay and, some said, prevented banks from operating freely.
Wells Fargo, the nation’s fourth largest bank, said it completed its $25 billion repayment. Last week the bank raised $12.25 billion in a common stock offering. Wells Fargo also paid accrued dividends of $131.9 million.
Citigroup said it repaid $20 billion, raising 20.5 billion in a widely panned auction last week. The government continues to hold $5.3 billion in trust preferred securities and 28% of Citigroup’s common stock, which the Treasury said it intends to sell in 2010.
The move, which both banks had signaled would happen, allows them to escape the heightened regulation and public scrutiny that came with accepting the TARP funds.
“With repayment of the TARP investment, we can intensify our focus on what we do best: helping consumers and businesses achieve financial success,” Wells Fargo CEO John Stumpf said in a press release.
He also said that the San Francisco banking giant “supplied more than $640 billion in credit to consumers and businesses” and “helped more than 400,000 households preserve their home ownership” since, as he put it, Wells Fargo “accepted” TARP funds.
“We thank the U.S. government and taxpayers for their support of our financial system,” Mr. Stumpf said.
When Citigroup announced its repayment plan, CEO Vikram Pandit had said, “We owe the American taxpayers a debt of gratitude.”
With the actions by Wells Fargo and Citigroup, the nation’s four largest banks have returned their aid packages, as have several large regional banks. The largest banks that haven’t yet repaid their TARP funds are PNC Financial Services Group Inc. and SunTrust Banks Inc.
J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley Capital One Financial Corp. and BB&T Corp. were among the first to repay earlier this year.
Some bankers said that regulators’ demands for ever-higher capital levels, exacerbated by TARP, hampered lending by tying up money. Overall, TARP, and months of negotiating repayment terms, proved a distraction for management.
