Richard Davis is putting his money where his mouth is.
Two weeks after he called the Troubled Asset Relief Program "a lousy program," the chief executive of U.S. Bancorp said Wednesday that he intends to return the $6.6 billion it received through the program as soon as the spring.
The Minneapolis company will do so as soon as regulators finish stress tests on it and give it permission to repay the funds, Davis said.
"This company would like to emerge from the Tarp assets as soon as possible … and move forward unfettered, as it were," he said.
Davis revealed his intent to return the money during a conference call to discuss U.S. Bancorp's plan to slash its quarterly dividend 88%, to 5 cents a share. But he had already made clear his discomfort with the shifting obligations and mission statement that have marked the government program almost since its inception.
Last month he reportedly told attendees at a Thrivent Financial for Lutherans conference in Minneapolis, "There's no A, R or P in Tarp — it's just troubled."
At the time Davis complained that the program's goals and rules have been a moving target since it was created. He also said Tarp was hurting healthy banking companies like his, which were "told, not asked" by the government to take the money last fall.
Those remarks have been echoed by executives at several other companies lately.
This week TCF Financial Corp. in Wayzata, Minn., said it plans to return its Tarp money, and last week Iberiabank Corp. in Lafayette, La., said the same. Both companies said the money has too many conditions.
Chicago's Northern Trust Corp. has also said it plans to exit.
James Dimon, JPMorgan Chase & Co.'s CEO, has made rumblings about following suit.
"Eventually, we will talk about repaying the Tarp. To me, 'eventually' could be as soon as later this year," Dimon said last week after his company announced a dividend cut. However, he also said the timing would depend on conversations with regulators.
The $266 billion-asset U.S. Bancorp is the largest banking company to say it plans to repay bailout money quickly from the government.
Jason Goldberg, an analyst at Barclays PLC's investment bank, said he expects more large companies to exit the program soon.
"Initially, banks thought taking Tarp was a sign of strength, and their stocks went up when they announced it," Goldberg said. "Now, ironically, the market is going to reward banks who pay it back earlier than expected, because it's now a sign of strength, so we've come full circle."
On Wednesday, U.S. Bancorp's shares fell 12.5% during a broader market sell-off. The KBW Bank Index shed 3.3%.
James M. Rockett, a partner at Bingham McCutchen LLP in San Francisco, said many companies — healthy and troubled — will remain in the program, because they still consider the government's money to be a viable form of capital.
"It's good for institutions who want to shore up their capital base, so they can continue to lend and absorb any additional problems due to the economy," Rockett said.
Davis said U.S. Bancorp's dividend cut was "prudent" in light of the current economic conditions and could help accelerate the company's repayment of the Tarp money.
"We chose to reduce the dividend to preserve capital and place our company in a position of strength, to withstand the challenges facing all of the industry today," Davis said.
On Dec. 31, U.S. Bancorp's Tier 1 capital ratio was 10.6%, and its tangible common equity ratio was 3.2%.
Wells Fargo & Co. is now the holdout among the biggest U.S. banking companies in maintaining its dividend.
Davis also gave an update on his company's performance so far this quarter.
He said credit costs will remain elevated, securities income will likely remain flat and loan growth will likely be similar to that of the fourth quarter, when average loans rose 6.4%. (Excluding acquisitions, they rose 3.1%.)
"Bottom line, we expect to earn money this quarter and the full year," Davis said.
U.S. Bancorp has been able to increase both loans and deposits on the balance sheet by wooing customers from struggling community banks, as well as by participating in more loan syndications for corporate and middle-market borrowers, he said.
Barclays' Goldberg said other banking companies, including JPMorgan Chase, Wells Fargo and regionals like PNC Financial Services Group Inc., have also been able to "play offense" and take market share from large and small competitors.
