Bank of America Says It's Ready to Exit TARP
Bank of America (BAC) has told U.S. regulators that it has met the final condition that was set on its plan to exit the government's Troubled Asset Relief Program, the Financial Times reported Monday.
BofA, which repaid $45 billion in TARP funds in December 2009, needed to raise $3 billion in capital and record the gains by the end of this year. Regulators intend that money to help build the bank's equity, giving it a stronger footing after it leaves the TARP.
If Bank of America, the biggest U.S. bank, fails to satisfy the Federal Reserve Board that it has added enough cash to its books through asset sales, it will have to issue additional common shares, diluting its per-share earnings.
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BofA told the Fed that recent moves would bring the bank close to the $3 billion requirement, FT sources said. The moves include selling 43.6 million shares of BlackRock (BLK). BofA became BlackRock's largest stakeholder after acquiring Merrill Lynch during the financial crisis. The bank also sold its right to buy 1.79 million shares in China Construction Bank.
The remainder of the $3 billion is expected to derive from tax gains related to holding a smaller slice of BlackRock, the sources added. Another option, as the bank mentioned in its third-quarter filing, would be to issue stock to certain employees in lieu of year-end cash awards.
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