Bank of America said Wednesday it had reached an agreement to repay the US government the entire 45 billion dollar investment it provided the bank under a programme to stabilise the financial system. The largest US bank by assets will be making the largest single payback under the Troubled Asset Relief Program, a program approved by Congress last year at the height of the financial crisis.
"We appreciate the critical role that the US government played last fall in helping to stabilise financial markets, and we are pleased to be able to fully repay the investment, with interest," said Bank of America chief executive Kenneth Lewis. "As America's largest bank, we have a responsibility to make good on the taxpayers' investment, and our record shows that we have been able to fulfil that commitment while continuing to lend.
"We believe that this is good news, not only for the US taxpayer and our company, but for the country as it is a milestone indicating that public policy has succeeded in helping our industry and the economy begin to recover." Many banks repaid the government earlier this year, escaping tougher scrutiny from regulators that could include limits on executive pay and bonuses at bailed-out firms.
"We are pleased that Bank of America is moving ahead with plans to pay the taxpayers back in full," a Treasury official said in an email to AFP. "As banks replace Treasury investments with private capital, confidence in the financial system increases, taxpayers are made whole, and government's unprecedented involvement in the private sector lessens."
The bank based in North Carolina said it would repurchase the preferred shares issued to the US Treasury as part of TARP, but would not immediately buy back the warrants, or options to buy additional shares. Shares, which had shed 1.51 percent in New York, soared three percent to 16.12 dollars in post-session electronic trading.
Bank of America said it would use 26.2 billion dollars in "excess liquidity" and 18.8 billion dollars from the sale of "common equivalent securities," subject to shareholder approval of the sale. This will increase the bank's capital ratios seen as an important indicator of financial health. In addition, Bank of America agreed to increase equity by four billion dollars through asset sales to be approved by banking regulators. If not approved, the company agreed it would raise a commensurate amount of common equity.
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