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Chase plans stock sale to help pay TARP debt

JPMorgan Chase plans to raise $5 billion through a stock offering as it seeks to repay the $25 billion that the bank was awarded in the government's troubled asset relief program.
/ Source: The Associated Press

JPMorgan Chase & Co. said Monday it plans to raise $5 billion through a common stock offering as it seeks to repay the $25 billion that the bank was awarded in the government’s troubled asset relief program.

New York-based JPMorgan Chase was among a group of the nation’s 19 largest banks that received money from the TARP program and were subjected to “stress tests” to determine their financial strength. JPMorgan Chase was among the nine banks the government determined didn’t need to raise more capital.

JPMorgan Chase said Monday it plans to raise the $5 billion “to satisfy a supervisory condition” under TARP requiring big banks to “demonstrate access to the equity capital markets.”

JPMorgan Chase said it believes that once it raises the $5 billion, it will have satisfied government criteria for fully redeeming TARP’s preferred capital, although it hasn’t won government approval to repay the full $25 billion. The bank said it expects to satisfy criteria to fully repay preferred capital “before the end of June.”

At JPMorgan Chase’s annual meeting on May 19, Chairman and Chief Executive Jamie Dimon said the bank didn’t have “any real details” at that time on how or when it could make full repayment.

Last month, a handful of banks that joined JPMorgan Chase in passing the tests — BB&T, U.S. Bancorp, Capital One Financial Corp. and Bank of New York Mellon Corp. — said they were raising capital in order to repay TARP.

Banks that fell short of the government’s stress test requirements have been scrambling to raise money through stock offerings and other financial moves.

Under TARP, banks had to apply to their primary regulators for permission to repay the money they were awarded last fall in the string of financial bailouts. Successful applications were forwarded to the Department of Treasury for final approval.

On Monday, the Federal Reserve announced rules for banks to repay the bailout funds, clearing the way for the 19 largest to wind down their reliance on government support.

JPMorgan Chase announced its capital-raising plan after its shares fell 79 cents, or about 2.1 percent, to close at $36.11. Following the news, its stock lost 34 cents to $35.81 in aftermarket trading.