June 9, 2009
BIRMINGHAM, Ala. - A University of Alabama at Birmingham (UAB) School of Business finance expert believes today's U.S. Treasury Department announcement about TARP loan repayments could signal a round of big bank acquisitions as some of the country's largest financial institutions start on the road to recovery.
The U.S. Treasury this morning announced plans to allow 10 of the country's biggest banks to begin repaying the loans received as part of the government's Troubled Asset Relief Program (TARP). According to news reports, the government has deemed the banks, reportedly including J.P. Morgan Chase and American Express, healthy enough to withstand continued economic instability and operate without government funds. The banks are expected to return approximately $68.3 billion to the Treasury, freeing them from deepened government oversight and policy intervention.
"Much of the money the banks are using to repay the government was raised through private investment," said Assistant Professor of Finance Andreas Rauterkus, Ph.D. "This means Wall Streets believes the worst is over for these 10 financial institutions, and that should help solidify their future operations.
"However, the success of these few banks does not mean we will see an end to bank failures," Rauterkus said. "In fact, we may be seeing a separation of the sector's stronger players that can raise capital from the weaker institutions that cannot raise private investment money to repay the TARP.
"This sets up an environment where some of these stronger banks could move into acquisition mode and look to acquire some of the weaker players in the marketplace.
About the Expert
Andreas Rauterkus, Ph.D., is a native of Frankfurt, Germany and has earned degrees from universities in both Europe and the United States. His global education has provided him with a unique world view of finance, including a deep comparative knowledge of international banking systems and current trends with respect to European Union countries and the United States.
About the UAB School of Business
The UAB School of Business is located in the heart of Alabama's largest city and business center. For more information on how the school's Birmingham location provides unique internship and other out-of-the-classroom experiences, log on to www.uab.edu/business.