Reuters logo
Most banks will repay TARP by Q4: Morgan Stanley
May 22, 2009 / 3:22 PM / 9 years ago

Most banks will repay TARP by Q4: Morgan Stanley

NEW YORK (Reuters) - Most U.S. banks will repay government bailout funds by the fourth quarter of 2009, and banks will likely issue more stock over the next few quarters, analysts at Morgan Stanley said.

<p>U.S. Treasury Secretary Timothy Geithner puts a piece of foreign currency back in his wallet after showing off the contents of his wallet to a photographer during a break in his testimony before the House Appropriations Subcommittee on General Government and Financial Services on Capitol Hill in Washington, May 21, 2009. Geithner said that a bailout for banks was steadying the financial system but care must be taken to ensure that normal market forces are allowed to operate. REUTERS/Jim Bourg</p>

Analysts led by Betsy Graseck, however, said most large banks will repay funds from the Treasury’s Troubled Asset Relief Program in the third quarter, while Bank of America Corp (BAC.N) and Citigroup Inc (C.N) may make a second round of payments in the fourth.

Morgan Stanley analysts raised their price targets by an average 33 percent for bank stocks including JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N).

The pace at which loans deteriorate should slow down over the next few quarters, with nonperforming loans peaking in the fourth quarter of this year and declining in first half of next year, the analysts wrote in their note to clients.

Credit costs should remain elevated in 2010 through the beginning of 2011, the analysts said. But the large gap between the short-term interest rates at which banks fund and the long-term rates at which they lend should translate into higher lending margins, which helps earnings, the analysts said.

They downgraded SunTrust Banks Inc (STI.N) to “underweight” from “equal weight,” saying the bank has a relatively higher exposure to Southeast residential construction lending.

The KBW Banks Index .BKX was down 0.6 percent in morning trading.

Reporting by Tenzin Pema; Editing by Brian Moss

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below