Following the recent regulatory approval, Popular, Inc. (BPOP) has fully repaid its dues under the Troubled Asset Relief Program (:TARP). The company has repurchased trust capital securities worth $935 million held by the U.S. Treasury. However, the Treasury will continue have the rights to purchase an additional 2,093,284 shares of Popular’s common stock.
In Aug 2009, the trust capital securities were issued to the U.S. Treasury in exchange for 935,000 shares of Popular’s Series C preferred stock – initially issued in Dec 2008 to the U.S. Treasury under the Capital Purchase Program (:CPP). As previously announced, Popular utilized $400 million from the proceeds of its recent issuance of 7.000% Senior Notes due 2019 and available cash to clear the dues.
Against the original investment of $935 million in Popular, the Treasury recovered $1.22 billion of principal and interest. According to the Treasury, Popular was the largest bank remaining in the CPP to clear the TARP dues.
The Treasury’s Achievement So Far
The TARP was set up to bail out troubled institutions at the peak of the 2008 financial crisis. The aim of this program was to stabilize the financial system, restore economic growth and prevent foreclosure. It authorized the U.S. Treasury to purchase troubled companies’ assets and equity for strengthening their capital position.
With the economy gradually rebounding, many financial companies like Popular have come a long way and improved their overall business performance. Consequently, many of these companies, which were offered assistance through TARP, have cleared their dues, either fully or partially.
In its latest release, the Treasury mentioned that they have realized substantial gain from the TARP for banks. With the latest repayment, the recovered amount stands at more than $274.5 billion from banks through repayments, dividends, interest, and other income, against the initial investment of $245 billion. In comparison to total TARP investments of $424.5 billion, the recovered amount currently stands at $439.6 billion.
We remain encouraged by the Treasury’s efforts in recovering the taxpayer’s money as this indicates that the Treasury is on track to close the program profitably.
On Popular’s part, the repayment comes as a significant relief in terms of its prolonged debt burden. Also, the company will now have more financial flexibility.
Popular currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Banks- Southeast space include Middleburg Financial Corporation (MBRG), Capital Bank Financial Corp. (CBF), Independent Bank Group, Inc. (IBTX). Middleburg Financial sports a Zacks Rank #1 (Strong Buy) while both Capital Bank and Independent Bank bear a Zacks Rank #2 (Buy).
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