DOW JONES NEWSWIRES
Some of the largest U.S. financial institutions announced plans
Thursday to raise cash to meet the requirements of the U.S.
government's stress tests, as 10 of the 19 largest firms will be
required to raise a combined $75 billion in capital.
The government for the first time divided healthy banks from
those that may need help to weather a worsening economy.
Bank of America Corp. (BAC) was asked to raise $33.9 billion, by
far the largest amount, with Wells Fargo & Co. (WFC) and GMAC
LLC being the only other financial institutions needing more than
$10 billion. They were asked to raise $13.7 billion and $11.1
billion, respectively.
Wells Fargo and Morgan Stanley (MS) were among the first banks
on Thursday to rush to raise capital following preliminary
statements by the Federal Reserve. Wells Fargo said it would offer
$6 billion in stock, while Morgan Stanley said it intends to sell
$2 billion.
Separately, Wells Fargo said it wasn't surprised by the results
since it took on a higher risk of loans and securities with its
acquisition of Wachovia Corp.. Wells Fargo said it would have been
well above the Tier 1 common equity target of 4% if it hadn't
written off almost $40 billion of troubled loans from Wachovia.
Meanwhile, Bank of America said it is seeking to end
negotiations to acquire asset protection from the U.S. and said it
won't need any new government money.
Citigroup Inc. (C) said it would expand its February public
exchange offer by $5.5 billion to meet the government's stress test
requirements. At that time, Citigroup had said it would offer to
convert as much as $27.5 billion in preferred stock not held by the
federal government to common stock, with the U.S. agreeing to match
up to $25 billion of the conversions.
GMAC LLC said its requirements don't include any additional
capital required to finance Chrysler LLC dealers and customers
related to GMAC's agreement with the auto maker.
As for KeyCorp (KEY), which was told to increase its tangible
common equity by $1.8 billion, it said it has a range of ways to
raise the funds in the next six months from nongovernmental
sources. If KeyCorp is unable to raise the money, it said it would
convert its $2.5 billion in TARP preferred shares to satisfy the
government's requirement.
Regions Financial Corp. (RF) said its overall goal is to
eliminate all governmental sources of capital and extraordinary
liquidity sources. It is being told to raise $2.5 billion as a
result of the stress test.
Fifth Third Bancorp (FITB), which has to raise $1.1 billion, the
second-lowest requirement of the 10 needing to raise capital, said
it currently meets the new Tier 1 standard and said it plans to
utilize private market alternatives to raise the funds in the next
six months.
Bank of America, Citigroup, Wells Fargo, GMAC and Morgan Stanley
were told they need to raise capital due to the results of the
government's stress tests. Regions Financial, Fifth Third, KeyCorp,
PNC Financial Services Group Inc. (PNC) and SunTrust Banks (STI)
also were told to bolster their reserves.
By contrast, JPMorgan Chase & Co. (JPM), Goldman Sachs Group
Inc. (GS), American Express Co. (AXP), BB&T Corp. (BBT), State
Street Corp. (STT), MetLife Inc. (MET), Bank of New York Mellon
Corp. (BK), US Bancorp (USB) and Capital One Financial Corp. (COF)
don't need to raise additional capital.
State Street said that, with the stress test completed, "it was
now in position to consider repayment of the TARP preferred stock
and warrants under the appropriate circumstances." Goldman Sachs,
meanwhile, said it was "highly confident" it would soon repay the
government's investment from TARP.
PNC Financial said it plans to increase shareholders equity by
$600 million through growth in retained earnings and accessing
capital markets. It doesn't plan to convert preferred shares issued
under TARP and said it would repay $7.6 billion in government funds
"as soon as appropriate."
Bank of New York Mellon said earlier this week the bank priced
the sale of a $1.5 billion senior debt offering that received "very
strong investor interest." The offering is expected to close
Tuesday.
-By John Kell, Dow Jones Newswires; 201-938-5285;
john.kell@dowjones.com
(Kathy Shwiff contributed to this story.)