WORLD> America
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WORLD> America
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Source: Bank of America to need $34B in capital
(Agencies)
Updated: 2009-05-06 22:38 WASHINGTON/NEW YORK– Bank of America Corp has been deemed to need as much as $34 billion in additional capital, according to the results of a government stress test, a source familiar with the results said late on Tuesday.
Bank of America spokesman Scott Silvestri declined comment. A possible $34 billion capital shortfall is certain to increase pressure on CEO Kenneth Lewis, who was last week ousted by shareholders as chairman of the biggest US bank.
It may also unnerve investors who had hoped the results of the stress tests on Bank of America and 18 other banks might show the industry was in less dire condition than had been feared. Shares of major US banks have nearly doubled since bottoming out in early March. US equity market futures extended losses on Wednesday and the yen gained following the news. About 10 of the 19 banks being stress-tested are expected to need more capital buffers, a person familiar with the official talks has said. The person was not authorized to speak because the results are not public. Many analysts have speculated that other banking companies that may need more capital, either because they do not have enough tangible common equity or are experiencing rising loan losses, include Citigroup Inc, Wells Fargo & Co, Fifth Third Bancorp, GMAC LLC, KeyCorp, Regions Financial Corp and SunTrust Banks Inc. CEO had said no capital needed The government has spent three months conducting stress tests on the 19 largest US banks to determine their revenue, losses and capital needs, should economic conditions deteriorate even further than many economists expect. Officials plan to release results of the tests late on Thursday, and are expected to reveal both aggregate and individual banks' figures. Bank of America has been at the top of the list of those believed to need more capital, as it faces significant credit losses and a controversial takeover of Merrill Lynch & Co, which closed on January 1. The $34 billion figure more than triples previously published reports of Bank of America's capital needs. Lewis had told analysts on an April 20 conference call that "we absolutely don't think we need additional capital," but added that credit conditions remained weak, especially in credit cards. "Make no doubt about it, credit is bad, and we believe credit is going to get worse," Lewis said. Bank of America that day reported a surprisingly large first-quarter profit, but much of the amount came from one-time gains and an accounting change, which may not be repeated. BofA's nonperforming assets surged 41 percent in the quarter to $25.74 billion. The Federal Reserve and Treasury declined comment. Most of the 19 US banks being stress-tested intend to hold press conferences on Friday to explain the results of the government's assessments, said a source briefed on the plans, adding that many of the banks are in the process of crafting capital recovery plans. |
