A significant amount of the next wave of bank paybacks of government money will be from large, well-known institutions, and may satisfy some critics who felt that the "bailout" was a waste of taxpayers funds, rather than being the investment that it actually was.

9 Ways To Go Bankrupt

The Capital Purchase Program (CPP), an integral part of the Troubled Asset Relief Program (TARP) initiated by the Bush Administration, has certainly been one of the more controversial parts of the government "bailout" with its restrictions on executive pay, dividends and other corporate activity, leading most participants to regret enrolling in the plan.

Most of the banks announcing that they would redeem the preferred stock issued to the U.S. government as part of the CPP have been small regional or community banks that paid back what amounted to only a pittance of the hundreds of billions that the government invested in the nation's financial sector. These include First Niagara Financial Group Inc. (Nasdaq:FNFG) which took $184 million, and Somerset Hills Bancorp (Nasdaq:SOMH) which received only $7.4 million.

Not so for the next round, as already three of the banks that were assessed in the Supervisory Capital Assessment Program (SCAP), or stress tests, as they are colloquially known, have announced they are raising equity to be used at least partially for this purpose. (Break down the walls around researching financial institutions' financials Analyzing A Bank's Financial Statements.)

U.S. Bancorp (NYSE:USB) said it was conducting an equity offering to raise $2.5 billion, and issuing a five year note in the amount of $1 billion.

Capital One (NYSE:COF) is issuing 56 million shares of its common stock, which, at the current price of $28.50, would raise approximately $1.6 billion.

BB&T (NYSE:BBT) announced a $1.5 billion offering of common stock, and also cut its dividend to retain capital.

All these banks would need to do additional capital raising, or use current funds as the amount raised falls short of what they received from the government when it issued preferred stock and warrants. U.S. Bancorp received $6.6 billion, Capital One received $3.5 billion and BB&T took in $3.1 billion.

All three banks were unscathed by the SCAP, with none needing a capital buffer under the adverse scenario that the Federal Reserve conducted. The other six institutions that had no need for capital are American Express (NYSE:AXP), JP Morgan (NYSE:JPM), Met Life (NYSE:MET), Bank of New York Mellon Corp. (NYSE:BK), Goldman Sachs (NYSE:GS) and State Street (NYSE:STT).

Look for some of these six next to either raise capital or announce that it will use existing capital to redeem the government preferred, except for Met Life, which was the only one either smart or lucky enough to turn it down.

Most felt that the CPP was a bailout, and represented a loss of cash for the government and thus a loss for the taxpayers. Hopefully, the actions of the next group of banks, which will be paying back every penny they received with accrued interest, will convince the public that the investment the government made wasn't so bad after all. (Learn more in Is the current government bailout a fool in the shower?)

Related Articles
  1. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  2. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  3. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  4. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  5. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  6. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  7. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  8. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  9. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  10. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
Trading Center