Banks Least Likely to Pay Back Bailout Funds

Our informal "stress test" shows which bailout banks are in the worst shape.

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Some banks that have received money from the government's Troubled Assets Relief Program may soon be able to start paying it back—once the government allows them. But a number of banks are clearly still struggling. The government "stress tests" run on the 19 biggest banks, for instance, show that as many as 10 of them may need to raise more capital to cover losses that will continue to mount as the recession intensifies.

If they can't raise that money the old-fashioned way—from investors in the private sector—they'll have no choice but to ask the government for even more bailout money. That could ultimately add $100 billion or more to the $250 billion the government has already injected into banks.

[See the banks most likely to pay back their bailout funds.]

We've devised our own simplified "stress test" to gauge which banks are in the best position to pay back the TARP funds they've received and which are likely to need government aid for months or years to come. Using easy-to-understand public data, we've developed a "market-to-bailout ratio" for about 45 banks, which measures how investors value the bank relative to its size and to the amount of bailout money it has received. [See a detailed methodology.]

Banks with a market-to-bailout ratio of 2.0 or higher are in fairly good shape, with investors valuing the company well above the amount of government aid it has received. A ratio of 1.0 would mean that investors believe the bank's market value is only equal to the amount the government has invested in it. To pay back the government injections, such banks would probably have to sell assets, which could worsen their prospects. A ratio lower than 1.0 is even worse and might signal that the bank, instead of being ready to pay back public funds, might need more.

[See the best and worst bailed-out banks.]

Based on our numbers, here are the banks likely to take the longest to pay back taxpayer funds they've received:

Bank "Market-to-bailout ratio" (higher is better) Stress test? Total assets (millions) 12/31/08 Market cap (millions) 5/4/09 TARP funding (millions) TARP funding/
total assets
Market cap/
total assets
Citigroup 0.3 Yes 1,938,470.0 17,130 50000.0 2.6% 0.9%
CIT Group 0.4   80,448.9 852 2330.0 2.9% 1.1%
South Financial Group 0.4   13,602.3 139 347.0 2.6% 1.0%
Sterling Financial 0.6   12,790.7 173 303.0 2.4% 1.4%
Webster Financial 0.7   17,583.5 282 400.0 2.3% 1.6%
Fifth Third Bank 0.7 Yes 119,764.0 2,530 3408.0 2.8% 2.1%
Citizens Republic Bancorp 0.7   13,086.0 224.8 300.0 2.3% 1.7%
Huntington Bancshares 0.8   54,352.9 1,090 1398.0 2.6% 2.0%
Popular 0.8   38,882.8 781 935.0 2.4% 2.0%
Zions 1.0   55,092.8 1,370 1400.0 2.5% 2.5%
Marshall & Ilsley 1.0   62,336.4 1,670 1715.0 2.8% 2.7%
Regions Financial 1.0 Yes 146,247.8 3,490 3500.0 2.4% 2.4%
Bank of America 1.1 Yes 1,817,943.0 58,630 52500.0 2.9% 3.2%
Suntrust 1.1 Yes 189,138.0 5,490 4850.0 2.6% 2.9%
Keycorp 1.3 Yes 104,531.0 3,230 2500.0 2.4% 3.1%
First Bancorp (San Juan, P.R.) 1.4   19,491.3 556 400.0 2.1% 2.9%
Comerica 1.5   67,548.0 3,380 2250.0 3.3% 5.0%
East West Bancorp 1.6   12,422.8 478 306.5 2.5% 3.8%
 
Notes: Doesn't include GMAC, which is privately owned and has no public market capitalization. Also doesn’t include AIG, Fannie Mae, or Freddie Mac, which aren't banks.
 
Sources: FDIC, Treasury Dept., ProPublica Ultimate Bailout Guide, Milken Institute, Google Finance
TAGS:
government intervention
banking
  • Rick Newman

    Rick Newman is the author of Rebounders: How Winners Pivot From Setback to Success and the co-author of two other books. Follow him on Twitter or e-mail him at rnewman@usnews.com.

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