June 17 (Bloomberg) -- JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among 10 of the nation’s largest banks that repaid $68 billion to the U.S. Treasury in a step toward shedding government restrictions on lending and compensation.

JPMorgan, the second-largest U.S. bank by deposits, repaid $25 billion while Goldman Sachs and Morgan Stanley each gave back $10 billion. All three banks are based in New York. Banks have unveiled plans to raise more than $100 billion in capital, and financial stocks rose in the past three months on signs the global credit contraction is easing.

“Our strong capital position allowed us to pay back TARP in a very short amount of time,” said Kelly King, chief executive officer of BB&T Corp., the Winston-Salem North Carolina-based bank that repaid $3.1 billion. “Now we have a singular focus on the business of serving our clients,” King said today in a statement.

American Express Co., the biggest U.S. credit-card company, spent $3.39 billion to buy back preferred shares under the Troubled Asset Relief Program. Minneapolis-based U.S. Bancorp refunded $6.6 billion; Capital One Financial Corp. of Mclean, Virginia, repurchased $3.57 billion; Bank of New York Mellon Corp. paid $3.04 billion; Boston-based State Street Corp. returned $2 billion; and Chicago-based Northern Trust Corp. paid back $1.58 billion, the banks announced.

JPMorgan fell 77 cents, or 2.3 percent, to $32.87 at 4:09 p.m. in composite trading on the New York Stock Exchange. Goldman Sachs dropped $4.43 to $139.73. Morgan Stanley fell 62 cents to $27.48. American Express declined 74 cents to $23.95. BB&T fell 65 cents to $21.58.

Warrants

U.S. Bancorp dropped 9 cents to $17.77. Capital One declined 67 cents to $22.48. Northern Trust fell $1.58 to $51.15. State Street, the lone riser, gained 24 cents to $45.25.

“The 10 large financial institutions that have met TARP repayment requirements as announced last week will complete payment today,” the Treasury said in a statement.

The Treasury bought preferred stock and demanded warrants -- the right to buy common stock at a set price for 10 years -- so taxpayers could benefit from any rebound. Typically, the warrants equaled 15 percent of the TARP capital. JPMorgan, U.S. Bancorp, American Express, BB&T and Northern Trust notified the Treasury of their intent to repurchase the warrants.

JPMorgan and seven other banks may spend about $3.88 billion this quarter related to dividend and interest costs to repay the government, Rochdale Securities analyst Richard Bove said yesterday.

TARP Costs

JPMorgan will incur the highest cost, $1.48 billion, to repay TARP, Bove wrote in a note. Morgan Stanley’s cost will be $1.02 billion, he said.

Goldman Sachs said it also made a one-time preferred dividend payment of about $425 million, which will reduce earnings per share in the second quarter by approximately 77 cents. Morgan Stanley will have an expense of $892 million, Bank of New York will record a cost of $197 million and Northern Trust will have a $68.6 million expense. JPMorgan paid $795.1 million in dividends on its preferred stock.

Banks are repaying TARP almost eight months after then- Treasury Secretary Henry Paulson, seeking to quell market panic that followed the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc., provided banks with assistance from the $700 billion TARP fund passed by Congress.

The 10 banks also issued more than $99 billion of debt that’s guaranteed by the Federal Deposit Insurance Corp. JPMorgan, Morgan Stanley and Goldman Sachs were the biggest users of the FDIC guarantees among the 10 banks, while BB&T, Capital One and Northern Trust didn’t borrow under the program. The guarantees are on debt that matures before Dec. 31, 2012.

Bank of America Corp., the biggest U.S. bank by assets, and Citigroup Inc. weren’t among banks Treasury cleared to repay TARP. They each accepted $45 billion in U.S. aid. Wells Fargo & Co., the nation’s largest mortgage lender and the recipient of $25 billion in government aid, also wasn’t on the list.

To contact the reporters on this story: Josh Fineman in New York at jfineman@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net.

Last Updated: June 17, 2009 16:12 EDT