Bank Stress Test Aces Look to Repay TARP

Now that the U.S. government's stress tests results revealed that nine out of the 19 banks tested do not need additional capital, expect to see more banks repaying their federal bailout money this year.

"[W]e expect several of the banks not needing additional capital to act in the near term to return their TARP funding," CreditSights analysts wrote in a note.

"[P]aying back the TARP funds will allow these banks to operate their business without the onerous restrictions placed on the other banks in the program and could become an important competitive advantage vs. other bank peers," the note says. "So we could see some divergence in the banking sector between banks which return the TARP funds that are able to operate more freely and banks which still have the TARP investment may be subjected to more limits on their operations."

The stress test results announced by the Federal Reserve on Thursday revealed that the country's 19 biggest financial institutions will need to raise $75 billion as a buffer against loan losses through the remainder of the economic downturn.

Of the banks that were tested, Bank of America (BAC Quote) required the biggest infusion, of $33.9 billion, followed by Wells Fargo (WFC Quote) with $13.7 billion, General Motors' (GM Quote) GMAC financing arm with $11.5 billion, and Citigroup (C Quote) with $5.5 billion.

Large banks that were told they did not need extra capital included JPMorgan Chase (JPM Quote), Goldman Sachs (GS Quote) , American Express (AXP Quote), MetLife (MET Quote), Bank of New York Mellon (BK Quote) , State Street (STT Quote), Capital One Financial (COF Quote), US Bancorp (USB Quote) and BB&T (BBT Quote).