U.S. Earned $10.5 Billion on TARP Investments, Analysis Show

April 6 (Bloomberg) -- The U.S. Treasury Department has made $10.5 billion, or an 8.5 percent return, on its bailout of financial firms, a private analysis shows.

The report, which tallies money the government earned on sales of preferred stock and warrants held under the Troubled Asset Relief Program, was issued this month by financial research firm SNL Financial of Charlottesville, Virginia.

The profit came from $118.3 billion in aid that has returned to Treasury from 49 firms that “fully exited” the government’s capital purchase program.

The Treasury said April 2 that its programs aimed at stabilizing the banking system “will earn a profit thanks to dividends, interest, early repayments and the sale of warrants.” Total investments of $245 billion last year, initially projected to cost $76 billion, are expected to be profitable, the department said a statement.

The SNL report said “proceeds from both TARP warrant repurchases and auctions have largely fueled the profitability of the programs. The redemptions of the preferred shares alone generally only provide the government a 5 percent return, which comes from the dividends.”

American Express Co. and Goldman Sachs Group Inc.’s warrant repurchases in July 2009 “helped create some of the largest annualized company returns at 23.3 percent and 20.0 percent,” according to the report’s authors, Andrew Schukman and Russ Yates.

The Treasury still expects to lose a total of $117 billion on TARP, which includes financing for the auto industry and American International Group Inc., according to the Financial Times.

Treasury spokeswoman Meg Reilly said “the outlook for the U.S. financial system has improved, taxpayers are being repaid, the expected cost of resolving the financial crisis has fallen dramatically, and Treasury is winding down many programs that were put in place to address the crisis.”