By Erik Schatzker and Dakin Campbell
Sept. 2 (Bloomberg) -- Wells Fargo & Co. plans to repay the U.S. bank bailout program “shortly” without raising equity, a tactic that would protect the value of stakes held by investors including Warren Buffett’s Berkshire Hathaway Inc.
“We will pay it back, but we’re going to pay it back in a shareholder-friendly way,” John Stumpf, president and chief executive officer of the San Francisco-based lender, said yesterday in an interview on Bloomberg Television, referring to the TARP funds. “We are now earning capital so quickly, organically, we don’t want to dilute our existing shareholders.”
Ten of Wells Fargo’s biggest rivals repaid the U.S. in June after passing “stress tests” to measure how they would fare in a deeper recession. The bank, ranked No. 1 among U.S. home lenders this year, has chafed under extra government oversight that came with the $25 billion public stake, and the stock has dropped 11 percent this year. The KBW Bank Index is little changed in that period.
“We will pay it back shortly,” Stumpf said in the interview. He declined to give a date, saying an agreement depends on talks with the Federal Reserve, adding that he’s confident about reaching an accord. “Of all the issues I’m dealing with, this one doesn’t keep me up at night,” he said.
Wells Fargo generated $14.2 billion in the second quarter to satisfy demands from regulators for new capital after the stress tests, surpassing the $13.7 billion goal. Assets no longer collecting interest in the quarter climbed 45 percent to $18.3 billion from the first quarter, the bank said July 22.
Internal Engine
“They probably need a few more quarters to build up their capital levels before I would feel comfortable seeing them pay back TARP,” Jennifer Thompson, an analyst at Portales Partners LLC in New York who has a “hold” rating on Wells Fargo, said in an interview yesterday. “But they certainly are generating a tremendous amount of capital internally each quarter.”
Wells Fargo declined $1.31, or 4.8 percent, to $26.21 yesterday in New York Stock Exchange composite trading. Berkshire Hathaway, the insurance and investment holding company based in Omaha, Nebraska, is the bank’s biggest shareholder with a stake of about 6.5 percent, according to Bloomberg data.
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