Can banks stop leaking?
Most of the big banks the US Treasury say need more capital have laid out plans for raising it, but some will probably be taken over, says analyst Richard Bove.
Most of the big banks the Treasury Department says need more capital after running "stress tests" have laid out plans for raising it, says bank-watcher Richard X. Bove of Rochdale Securities in Connecticut, in a report to clients. The neediest, Bank of America, can fill its $34 billion gap by selling $10 billion worth of businesses, and $17 billion in new securities, and adding $7 billion, about what the bank earns in three months..
Wells Fargo (Philadelphia's biggest bank since it took over Wachovia last year) needs $14 billion, and plans to raise roughly half in a securities sale, the rest from earnings, according to Bove. Ceo John Stumpf skipped a visit to Philadelphia to help prepare a share sale that raised a little more than half that total. .
PNC, Pennsylvania's biggest bank, needs $600 million, which is a little more than it earned in the first quarter. "The company expects to accomplish this through a combination fo growth in retained earnings and other capital markets alternatives... We remain committed to responsible lending," the bank said in a statement last night.
Not every bank has a plan. KeyCorp of Cleveland wants to convert its preferred stock to common, giving the government a stake, but may not be financially strong enough to do it, says Bove. SunTrust made no initial announcement but "is likely" to do the same. Regions has hired an investment banker and may have to sell the company, he concludes,.