Banks plan stock offerings to pay off TARP

Three big U.S. banks announced large common stock offerings on Monday and said they would use proceeds to repay funds received under the government’s bank bailout program.

U.S. Bancorp (USB.N) said it plans to raise $2.5 billion, Capital One Financial Corp (COF.N) roughly $1.75 billion, and BB&T Corp (BBT.N) $1.5 billion. Capital One said its offering will total 56 million shares.

BB&T also said it will reduce its quarterly dividend 68 percent to 15 cents per share from 47 cents, saving $725 million a year, following 37 straight years of dividend increases. U.S. Bancorp also plans to sell medium-term notes.

In premarket trading, shares of U.S. Bancorp fell 3.7 percent, Capital One 8.7 percent and BB&T 6.6 percent.

The three banks were among the 19 lenders to undergo government "stress tests" of their ability to weather a long and deep economic downturn, and were among the nine found not to need more capital.

U.S. Bancorp took $6.6 billion from the government’s Troubled Asset Relief Program, while Capital One took $3.55 billion and BB&T $3.1 billion.

Hundreds of lenders took money from TARP, which was designed to spur lending and improve the economy.

Yet many now view TARP as an albatross that imposes too many restrictions, including on executive pay, and suggests that recipients are desperate for capital.

"Rational, objective lending is one of the most important purposes of the banking system, and when you inject Congress and the administration into it, it effectively politicizes the process, which is not healthy," BB&T Chief Executive Kelly King said in an interview on Monday.

King also faulted the stress tests, saying they unnecessarily created "huge levels of anxiety and concern" among investors. "Regulators have always had the ability to assess the capital of institutions, and require more if they chose," he said.

On Friday, Wells Fargo & Co (WFC.N) and Morgan Stanley (MS.N), each found to need more capital under the stress test, sold $8.6 billion and $4 billion of stock, respectively. Morgan Stanley also sold $4 billion of debt.

Goldman Sachs & Co and Morgan Stanley are arranging the U.S. Bancorp stock offering. Barclays Capital is arranging the Capital One stock offering. Goldman Sachs, JPMorgan and Morgan Stanley are arranging the BB&T stock offering.

In Friday trading, U.S. Bancorp shares closed at $20.54, Capital One at $31.34 and BB&T at $26.33, Reuters data show.

One Response to "Banks plan stock offerings to pay off TARP"

  1. Carl Nemo  May 12, 2009 at 12:23 am

    Todays market digested this stock offer idea and thought it to be good for a 155 point down day on the DOW!

    These banking scamsters come up with one wacked out scheme after another and expect the markets to embrace their “snake oil” sales pitch. Yep, we’re worse than broke and we want a bunch of very foolish people to buy stock in our failed banking enterprise…!? /:|

    Carl Nemo **==

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