Big US banks have started repaying the US Treasury for capital injected into the financial system.
JPMorgan Chase said it repaid the government for its $25 billion injection of funds. This was the largest of some $68 billion in expected repayments. Morgan Stanley said it repaid $10 billion.
The repayments came after the Federal Reserve and Treasury agreed to allow some banks to begin reimbursing a total of $68 billion in capital injections begun last year in an effort to stabilise a shaky financial system.
JPMorgan Chase said that it had now repaid the US government in full for the investment under the Troubled Asset Relief Program (TARP), and had paid a total of $795m in dividends on the preferred shares.
The banking group said it was notifying the US Treasury of its intent to repurchase the 10-year warrant issued to the Treasury in connection with the preferred investment, which gave the government an option to buy ordinary shares.
Separately, BB&T Corporation said it had repurchased the Treasury's preferred shares, repaying $3.1 billion. The North Carolina bank also paid a final dividend to make the total dividend payments $92.7m.
US Bancorp redeemed the $6.6 billion of preferred shares issued to the Treasury and also indicated its intent to repurchase the 10-year warrant.
The decision to allow 10 major banks to repay the government capital offered more evidence the fragile financial system is becoming able to stand on its own. But with some major banks still required to hold tens of billions in Treasury capital, the sector is not out of the woods, according to some analysts.
