Two regional U.S. banks plan to repay their government bailout loans, a sign of health that could put pressure on other lenders to shed government aid.
First Horizon National Corp
Huntington's shares fell after the news because the bank will sell so much equity to repay the government, analysts said. First Horizon's shares rose as investors cheered its move to shed government support.
Analysts said these repayment plans could be the first of another wave of TARP repayments, and suggest that the U.S. banking system is continuing to heal after the 2008 crisis.
Banks that have yet to repay the government should think about doing it soon, said Jeff Davis, bank analyst at boutique bank Guggenheim Partners.
If you're a bank that does wait now, the market might be left to assume there are deeper problems, Davis said.
The offerings from Huntington and First Horizon come one year after the largest U.S. banks -- including Citigroup Inc
The first wave of banks to repay TARP came in the summer of 2009, and included Goldman Sachs Group Inc
BIG, BUT NOT TOO BIG
Despite the latest round of offerings from smaller lenders, the largest U.S. regional banks may still be months away from buying back the government's temporary investment.
Regional banks SunTrust Banks Inc
The four banks were part of a larger group of the 19 biggest banks that underwent U.S. government stress testing in Spring 2009.
Huntington, with $53 billion in assets, and First Horizon, with $25 billion, fell well below that threshold.
Now, the Federal Reserve is retesting all of the stress test banks before allowing them to repay TARP, raise their dividends or repurchase shares.
Results are not expected until first quarter 2011, leaving a window for smaller banks to repay TARP.
Atlanta-based SunTrust has $5 billion outstanding under the program. Birmingham, Alabama-based Regions has $3.5 billion.
Cleveland, Ohio-based KeyCorp has $2.5 billion in government aid, while Cincinnati, Ohio-based Fifth Third received $3.4 billion.
Columbus, Ohio-based Huntington Bancshares said it would raise $920 million in common stock and offer $300 million in debt to repay TARP. Analysts said the move could result in the bank boosting its outstanding shares by 19 percent.
Huntington shares closed down 2.7 percent at $6.66 on Nasdaq on Monday. Later in the evening, Goldman Sachs announced Huntington's offering of over 146 million shares was priced at $6.30 per share.
Memphis, Tennessee-based First Horizon National Corp said it would raise $250 million through a common stock offering and issue $400 million in debt to pay off its TARP obligation.
First Horizon shares closed 3.7 percent higher at $10.92 on the New York Stock Exchange. Its offering of 23.81 million shares later priced at $10.50 per share.
In recent weeks, bank stocks have surged.
Huntington's price has increased 19 percent in the fourth quarter alone, and is up 87 percent for the year.
Standard and Poor's cut its recommendation to hold from buy after the stock offering was announced, but noted the TARP payoff would be a positive move for the company.
Two quarters from now, could (Huntington) have waited and gotten a better deal? Probably, said Morgan Keegan & Co analyst Bob Patten. But the stock has performed well, and this gets them out from under the government and back into being a buyer for small, troubled Midwestern banks.
Both offerings remain subject to regulatory approval. (Reporting by Maria Aspan and Steve James in New York, Joe Rauch in Charlotte, N.C., and Brenton Cordeiro in Bangalore; Editing by Jarshad Kakkrakandy, Dave Zimmerman, Matthew Lewis, Robert MacMillan and Richard Chang)