Wells Fargo Looks Most Fit for Life After TARP

NEW YORK (TheStreet) -- Of the three big banks that recently repaid bailout funds, Wells Fargo (WFC) could be the one whose post-TARP shares fare best.

Analyzing the impact of the Treasury's preferred stock investments in Wells Fargo, Bank of America (BAC) and Citigroup (C) is difficult. Besides getting rid of hefty dividend payments, the other benefits of paying back funds from the Troubled Asset Relief Program appear harder to value than the toxic assets themselves.

How does one put a price tag on uncertainty, or the value of a well-paid executive vs. a less well-paid one? Is it possible to quantify the impact on operations of intangible populist pressure? (Which, by the way, doesn't actually vanish with the Treasury's preferred stock, if Goldman Sachs (GS) is any example.) And how can investors truly determine whether any of these stocks are expensive or cheap, when Wall Street estimates have been horribly amiss for the banks over the past couple of years?

One way to look at each company's post-TARP stock potential is to gauge how dilutive its repayment has been; how getting rid of bailout funds is likely to impact its ability to earn; and whether being TARP-free will help mollify investor fears on other fronts.

For Wells Fargo, the major concern of investors for awhile has been whether it has enough capital to cover the bad loans on its balance sheet, much less a TARP repayment. The bank's capital metrics were, and still are, much lower than its peers. After paying back TARP, Bank of America expects to have an 8.5% Tier 1 ratio, while Citigroup anticipates an 11% ratio. Wells Fargo's metric is projected at 6.2%.