SOURCE: Rothman Research

Rothman Research

June 23, 2010 08:26 ET

TARP Repayment -- Yes We Can

JOHANNESBURG, SOUTH AFRICA--(Marketwire - June 23, 2010) - www.rothmanresearch.com -- Against all odds the first quarter of 2010 has been a dazzling display of what the banking sector could achieve given that they have been in the firing line since the financial crisis started. Earnings throughout most of the sector have been an apparent exhibit that the banks were moving towards stability. The truth remains, however, that a number of blemishes still linger as more than a few negatives continue to plague the banking sector; asset-quality troubles and enduring high levels of C&D (Construction & Development) loans and CRE (Commercial Real Estate) loans being some of the most alarming. Whilst these issues can be considered as contained cancerous cells within the sector, a pending financial reform has been hanging over this space with the intention of inflicting radical changes.

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While the financial reform is still brewing in an atmosphere of uncertainty concerning its overall impact on how the banking system will be regulated, some encouraging news from the U.S. Treasury Department last week indicated that the repayment of the Troubled Asset Relief Program (TARP) has been officially in excess of $4 billion as compared to the amount still owed. To date eleven major financial institutions, including Bank of America (NYSE: BAC), have refunded their TARP money in its entirety. This has been possible for most of those banks by building capital through issuance of equity securities and debt not backed by the U.S. government. However, there has been some TARP losses as well like CIT Group Inc. (NYSE: CIT) which failed to repay its $2.33 billion bailout fund when it filed for Chapter 11 under the U.S. Bankruptcy Code in November 2009. 

*Free downloadable research reports on Bank of America Corporation and CIT Group Inc. are available by signing up now at http://www.rothmanresearch.com/article/bac/23608/Jun-23-2010.html or http://www.rothmanresearch.com/article/cit/23609/Jun-23-2010.html

However, the TARP repayment news released last week is a major psychological milestone for banks and taxpayers. The recent news may be a way for banks to regain some of the lost esteem from taxpayers and investors.

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