U.S. Banks Remain Stuck In TARP, Choking on Commercial Real Estate Loans, (SNV, BAC, ZION)

As the U.S. economy pulls out of a recession and the biggest banks return to profitability, mounting defaults on commercial property may keep regional lenders from repaying bailout funds until at least 2011. Unpaid loans on malls, hotels, apartments and home developments stood at a 16-year high of 3.4 percent in the third quarter and may reach 5.3 percent in two years, according to Real Estate Econometrics LLC, a property research firm in New York.

That's a bigger threat to regional banks, which are almost four times more concentrated in commercial property loans than the nation's biggest lenders, according to data compiled by Bloomberg on bailout recipients. The concentration makes regulators less
likely to let regional lenders like Synovus Financial Corp. (NYSE: SNV) and Zions Bancorporation (NASDAQ: ZION) leave the Troubled Asset Relief Program, analysts said.

Smaller banks would remain stuck in TARP, while bigger lenders, including Bank of America Corp. (NYSE: BAC), repay the government and free themselves to set their own policies on executive pay.Jeff Davis, an analyst at FTN Equity Capital Markets Corp. in Nashville, Tennessee said, ``The largest banks have other areas where they can make money, be it consumer lending, capital markets and asset management.''