Newspaper article International Herald Tribune

Healthy U.S. Bank Clings to Bailout Funds

Newspaper article International Herald Tribune

Healthy U.S. Bank Clings to Bailout Funds

Article excerpt

M&T Bank, a regional lender based in Buffalo, New York, is among the banks that have not fully repaid the U.S. government for bailouts.

It is the bank bailout mystery.

M&T Bank performed solidly during the financial crisis. Now, in the aftermath, in contrast to regional bank peers, the lender is not cutting dividends or selling shares to increase capital. And M&T's stock has traded with a relatively high valuation, illustrating investors' faith in the bank.

Yet M&T, which is based in Buffalo, New York, finds itself in the company of U.S. financial sector slackers -- those banks that have yet to pay back fully the bailout money they received as part of the Troubled Asset Relief Program. While M&T redeemed $700 million worth of the government's preferred shares, it still owes taxpayers $382 million.

Many banks, particularly the stronger ones, repaid TARP as quickly as they could to free themselves from the restrictions that came with the program, as well as the stigma of having the government as a stakeholder. Banks typically sold new common shares to pay off their preferred shares. Most recently, Regions Financial raised $900 million in early April to return the bailout money. The only two other big regional banks that owe money to the Treasury Department, Synovus and Zions Bancorporation, fared far worse than M&T in the turmoil.

So why is M&T still hanging onto taxpayer money?

Like many relatively strong players, M&T capitalized on the crisis to acquire ailing firms like Wilmington Trust and Provident Bankshares. As a result, M&T ended up with a larger pile of bailout money.

The bank originally received a $600 million TARP investment in 2008, but then assumed an additional $482 million as it purchased other banks.

To pay off the remaining $382 million, the bank could easily issue new shares without depressing its stock price, analysts say. But M&T Bank may want to boast that it never let TARP damage existing shareholders, whose stakes would be diluted by the issuing of new stock.

"I think they want to keep it that way," said Jason Goldberg, a bank analyst at Barclays. …

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