Bank of America said that it will repay US taxpayers their entire $45 billion investment provided under the Troubled Asset Relief Program (TARP). The repayment will be made using $26.2 billion in excess liquidity and $18.8 billion in proceeds from the sale of common equivalent securities.
In addition, Bank of America agreed to increase equity by $4 billion through asset sales to be approved by the board of governors of the Federal Reserve. Repaying TARP will save the company approximately $3.6 billion in annual dividend costs from the TARP investment.
Bank of America also agreed to raise up to approximately $1.7 billion through the issuance of restricted stock in lieu of a portion of incentive cash compensation to certain Bank of America associates as part of their normal year-end incentive payments.
The repayment of TARP is the latest in a series of actions taken to reduce Bank of America’s reliance on government assistance. Other actions include, paying the US government $425m to terminate a term sheet that would have guaranteed up to $118 billion in assets, if a final agreement had been reached. Opting out of the Temporary Liquidity Guarantee Program (TLGP) in September.
Exiting the Term Auction Facility in the summer of 2009. Eliminating borrowings from the Federal Reserve’s Term Securities Lending Facility and Primary Dealer Credit Facility. Announcing plans to exit the Transaction Account Guarantee Program effective January 1, 2010.
Increasing tier 1 common capital by approximately $40 billion in the second quarter of 2009. Issuing more than $10 billion in non-government-backed debt in the public markets in 2009.
Kenneth Lewis, chief executive officer and president, said: “As America’s largest bank, we have a responsibility to make good on the taxpayers’ investment, and our record shows that we have been able to fulfill that commitment while continuing to lend.
“Adding TARP to our capital has allowed Bank of America to continue to support the economy. In the 12 months since the government first made its investment in Bank of America, our company originated $760 billion in new credit, or approximately $3 billion per business day.”
