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M&I gets approval for $1.7B Treasury investment

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Associated Press
October 29, 2008
— Marshall & Ilsley Corp. says it has received preliminary approval from the U.S. Treasury Department for a $1.7 billion investment under the government's $250 billion capital purchase program.

The Milwaukee-based company said Tuesday its participation is contingent on approval from its board of directors.


M&I, Wisconsin's biggest bank and 19th-largest in the United States, said it's been given preliminary approval to sell $1.7 billion in preferred stock to the U.S. Treasury, paying the government a 5 percent dividend for the first five years and 9 percent thereafter.


President and chief executive Mark Furlong said the money will allow M&I to "further increase our already substantial lending activity."


He says the Treasury Department's move underscore's M&I's strength as a financial institution.


The new money positions the bank to more easily weather shaky residential construction loans on its books in Arizona, and it likely sets M&I up to eventually take over another bank that isn't faring as well, analysts said.


"The intention is for the capital to be used either for growth or investment in others, such as an acquisition," Thane Bublitz, a bank analyst with Thrivent Asset Management in Appleton, told the Milwaukee Journal-Sentinel.


Greg Smith, M&I's chief financial officer, said in an interview with the paper Tuesday that the bank was "in a very strong capital position before this."


"It's a nice recognition of the health of M&I because you've got to remember, in the whole context of this plan, the banking regulators and the Treasury Department are really encouraging all healthy banks to participate," he said.


Although M&I was considered well-capitalized, the housing slump in some of its markets, especially Arizona and Florida, has taken a toll, the paper reported. Earlier this month, M&I reported earnings that were down 62 percent from the third quarter a year earlier. In the second quarter, the bank had recorded a nearly $394 million loss.


M&I's Smith said the bank isn't in a hurry to acquire anyone.


"We look at this capital as an opportunity to continue serving our customers and our communities through lending, etc., in an uncertain environment. Is it an acquisition tool for us? I guess that's not really where our head is at the moment," he said.



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