The U.S. Treasury Department is planning to auction off its warrant positions in four banks, which it received as part of its investments in banks through the $700 billion Troubled Asset Relief Program (TARP) during the height of the financial crisis. The government is taking this step to free the banks from state interference.
The four banks, whose warrants are expected to be sold via auctions over the next month, are Bank of America (BAC), Washington Federal (WFSL), Texas Capital Bancshares (TCBI) and Signature Bank (SBNY). These banks have fully repurchased Treasury’s preferred stock investment. The current move to sell their warrants will completely free these banks from government intervention.
Treasury will sell the warrants through a modified Dutch auction. According to the format, the four banks will be able to bid for the warrants themselves.
In similar transactions in Dec 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 warrant positions it holds in approximately 255 banks.
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.
Read the full analyst report on “BAC”
Read the full analyst report on “WFSL”
Read the full analyst report on “TCBI”
Read the full analyst report on “SBNY”
Read the full analyst report on “JPM”
Read the full analyst report on “COF”
Read the full analyst report on “TCB”
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