$6.6 Million from TCBI Warrants – Analyst Blog

The Treasury announced on Friday that it has received net proceeds of $6.6 million from the sale of warrants it had obtained as part of its investment in Texas Capital Bancshares Inc. (TCBI) through the Troubled Asset Relief Program (TARP) during the height of the financial crisis. TCBI had repaid the entire $75 million of bailout money it had received from the government in January 2009.

 

The Treasury auctioned 758,086 warrants at $8.85 each. The final price was above the floor price of $6.50 per warrant set by the Treasury. The TCBI warrants have a strike price of $14.84 and expire in January 2019.

 

The current move will completely free TCBI from government intervention. The auction of TCBI warrants follows the sale of Signature Bank’s (SBNY) warrants on Thursday, Washington Federal Inc.’s (WFSL) warrants on Wednesday and Bank of America Corp.‘s (BAC) warrants in the previous week.

 

The government received net proceeds of $11.2 million from the sale of Signature warrants, $15.4 million from Washington Federal warrants and a record $1.5 billion from the sale of Bank of America warrants.

 

The amount received from the auction of Bank of America warrants exceeds $1.1 billion raised from the sale of Goldman Sachs (GS) warrants earlier.

 

After Bank of America, Washington Federal and Signature, TCBI is the last among four banks whose warrants were scheduled to be sold via auctions this month.

 

In similar transactions during December 2009, the Treasury received $1.1 billion from the sale of warrants of JPMorgan Chase & Co. (JPM), Capital One Financial Corp. (COF) and TCF Financial Corp. (TCB). The government expects to conduct similar auctions in the future for other warrants it holds in approximately 242 banks.

 

Next, the Treasury is expected to auction warrants of Wells Fargo & Co. (WFC), PNC Financial Services Inc. (PNC) and Citigroup Inc. (C).

 

We think that the repayment of government money and repurchase of warrants can be viewed as a sign of recovery of the institutions as well as the economy. According to the Treasury, losses on TARP investments are likely to be significantly trimmed with the improvement in the overall financial condition.