First Horizon National Corp (FHN) said it is selling debt and equity to pay off $867 million of TARP aid.
First Horizon’s shares rose as investors cheered its move to shed government support.
Analysts said the repayment plan could be the first of another wave of TARP repayments, and suggest that the U.S. banking system is continuing to heal after the 2008 crisis.
“If you’re a bank that does wait now, the market might be left to assume there are deeper problems,” Davis said.
The offering from First Horizon comes one year after the largest U.S. banks – including Citigroup Inc (C), Bank of America Corp (BAC) and Wells Fargo & Co (WFC) – raised tens of billions of dollars to repay their government bailout aid. The first wave of banks to repay TARP came in the summer of 2009, and included Goldman Sachs Group Inc (GS) and JPMorgan Chase & Co (JPM).
Despite the latest round of offerings from smaller lenders, the largest U.S. regional banks may still be months away from buying back the government’s temporary investment.
Regional banks SunTrust Banks Inc (STI), Regions Financial Corp (RF), Fifth Third Bancorp (FITB) and KeyCorp (KEY) are the four largest U.S. lenders that have yet to repay TARP.
The four banks were part of a larger group of the 19 biggest banks that underwent U.S. government stress testing in Spring 2009.
First Horizon, with $25 billion, fell well below that threshold.
Now, the Federal Reserve is retesting all of the “stress test” banks before allowing them to repay TARP, raise their dividends or repurchase shares.
Results are not expected until first quarter 2011, leaving a window for smaller banks to repay TARP.
Atlanta-based SunTrust has $5 billion outstanding under the program. Birmingham, Alabama-based Regions has $3.5 billion.
Cleveland, Ohio-based KeyCorp has $2.5 billion in government aid, while Cincinnati, Ohio-based Fifth Third received $3.4 billion.
Memphis, Tennessee-based First Horizon National Corp said it would raise $250 million through a common stock offering and issue $400 million in debt to pay off its TARP obligation.
First Horizon shares closed 3.7 percent higher at $10.92 on the New York Stock Exchange.
In recent weeks, bank stocks have surged.
First Horizon’s offering remains subject to regulatory approval.