NEW YORK, N.Y. (
) -- When
Bank of America
executives were asked recently for specifics on a repayment of bailout funds, CFO Joe Price repeated that the bank is ready, but the decision is now in regulators' hands.
Comparing the firm's capital metrics to regulatory benchmarks and other companies that were allowed to repay Troubled Asset Relief Program money, BofA appears to be up for the task.
At Sept. 30, the Charlotte, N.C.-based bank had a 7.25% ratio of Tier 1 common capital as a portion of risk-weighted assets. That metric is the same one that the Federal Reserve used in the spring to determine which of the 19 largest bailout recipients would be allowed to repay the funds. Ten of them --
Bank of New York Mellon
to do so in June.
The Fed, using year-end data, found that the 19 firms had an average Tier 1 common risk-weighted ratio of 5.28%. The average bank that was strong enough to repay TARP had a ratio of 8.43%, while the weaker firms had a ratio of 5.2%.
BofA's ratio has risen from 4.23% a year ago by its own calculations and 4.6% at year-end, according to stress test results. It has raised more than the $33.9 billion in capital required by regulators to begin the process.
BofA is also eager to begin repaying the funds, since the money has brought intense scrutiny from the so-called "pay czar" Kenneth Feinberg. Feinberg has the authority to strike down what he considers excessive pay packages at firms that received more assistance than others, like BofA and
. He effectively pressured Lewis to forego his compensation this year.
The bank has proposed that it start repaying TARP in portions, so that it can at least leave the ranks of other weak firms whose capital metrics haven't improved in the same manner.
For instance, the government found Citi's Tier 1 common risk-weighted ratio to be 2.3% at year-end. The bank doesn't report identical metrics, but says it now has a simple Tier 1 capital ratio of 12.7%, up from 8.19% a year ago. However, those improvements have come only because the government converted a huge amount of preferred stock into common, effectively granting regulators a 40% ownership stake.
is still under the TARP blanket as well. The firm raised more than the $13.7 billion regulators required in the wake of the stress test. However, critics contend that Wells, which reports third-quarter results on Wednesday, still hasn't boosted its capital ratios enough.
Wells had a Tier 1 common risk-weighted ratio of 8.58% before acquiring Wachovia's tranche of troubled assets. The metric sank to 3.1% at year-end, and only rose to 4.49% by June 30. At mid-year, Goldman had a ratio of 12.4%, JPMorgan was at 7.7%, and both firms have raised capital adequacy measures since then -- as has BofA.
So when will BofA repay TARP?
"Some more specific guidance is supposed to come out from the regulators regarding repayment criteria very shortly," Price responded to an analyst query on Friday. "We will need to make sure we meet those criteria, but nothing else has changed from what we have said in the past. That's our goal."
Written by Lauren Tara LaCapra in New York