SunTrust Banks outlined its plan Friday to repay taxpayers for the nearly $5 billion in federal aid it received during the financial crisis.
To raise cash for the repayment plan, the Atlanta-based regional bank began selling $1 billion in new stock, and will soon issue $1 billion in new debt.
SunTrust is the largest U.S. bank yet to pay off its Troubled Asset Relief Program bailout.
Chris Marinac, bank analyst with FIG Partners in Atlanta, said SunTrust weathered criticism for not following the repayment path of other big banks and issuing shares at steep discounts during the depths of the financial shock.
Executives insisted they did not want to dilute the holdings of existing shareholders and reduce the bank’s earning per share potential. That decision appears to have paid off.
SunTrust shares currently trade at a higher price than its estimated book value of approximately $24.83, according to FIG estimates.
SunTrust shares surged Friday, rising nearly 5 percent to $29.59.
“They’ve won the battle on the timing of TARP repayment,” Marinac said.
“We are pleased to have the process behind us, and believe the outcome of the review strongly validates our deliberate approach to TARP repayment," SunTrust Chairman and CEO James M. Wells III said in a news release.
The U.S. Treasury will continue to hold warrants for 11.9 million shares of common stock exercisable at $44.15 per share, and 6 million shares of common shares exercisable at $33.70 per share. The bank may repurchase those warrants at a later date.
Marinac said SunTrust’s TARP plan, and one announced Friday by Cleveland-based KeyCorp, shows increasing confidence by regulators in the industry’s recovery.
SunTrust’s emergence from TARP also has significant ramifications for shareholders. The bank, like other TARP recipients, slashed quarterly dividends to a penny per share.
Wells said the company “looks forward to returning capital to its shareholders at the appropriate time."
Around two dozen Georgia banks still hold the bulk of their TARP funds. Nearly all are paying quarterly dividends to the government.
Columbus-based Synovus Financial, parent of community banks including Bank of North Georgia, received nearly $1 billion in TARP aid, the second most of all the state’s banks.
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