The number of US banks failing to repay bail-out funds continues to rise, with 115 missing their latest dividend payments due to the US Treasury. This compares to 91 non-payments in May and 74 in February.
The Treasury reported that:
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- Of the 115 deferrers, 28 missed payments for the first time since entering the TARP programme;
- These 115 institutions received $3.6bn in TARP funds, approximately 1.8% of the total disbursed under the scheme;
- Puerto Rico-based First BanCorp, which received $400m in government funds, is the largest institution to not pay its third-quarter dividend;
- 15 lenders have not made payments on five dividends, while seven have missed six payments; and
- California-based Saigon National Bank is the only institution to not make payment on all seven dividends.
Under the terms of the programme, failure to pay dividends for six dividend periods triggers the Treasurys right to elect two directors to the institutions board, but the Treasury has indicated it will not take such action.
A report from the Treasury said it "will prioritise institutions in part based on whether its investment exceeds $25m".
While the programme has created an overall profit for the Treasury, it has declared more than $2.3bn in losses with the failure of California-based Pacific Coast National Bancorp, the collapse of CIT Group and the receivership of UCBH Holdings.
The Treasury continues to discount its TARP preferred shares to woo firms into recapitalising TARP institutions.
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By GlobalDataThe private equity-assisted capital injections of Washington-based Sterling Financial, Pacific Capital and Virginia-headquartered Hampton Roads Bankshares have required the Treasurys investments to be converted at deep discounts.
In total, 123 companies are delinquent on at least one dividend, representing $137.8m in delinquent payments, or 1.4% of total dividends paid. These institutions hold approximately $3.6bn in bail-out funds.
On a more positive note, a research note from analysts SNL Financial reported that US lenders subject to the governments stress tests have sustained losses at substantially lower rates than assumed under the Supervisory Capital Assessment Programmes (SCAP) "more adverse scenario".
In the first half of the year, total net charge-offs for the 19 largest banks lagged the total loan loss assumptions in the stress tests on a prorated basis by roughly $112.05bn, or 33.9%.
According to SNL, the greatest discrepancy continued to be in first-lien mortgages, where losses tracked $48.34bn, or 63% below the prorated SCAP assumptions. The one area in which the banks exceeded the loss assumptions was in credit cards, with five institutions reporting higher-than-projected losses.
"Last years stress tests aimed to ensure the largest banks in the US would have adequate capital to weather a severe downturn," said JP OSullivan, associate director of financial services at SNL.
