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Bank of America may face $34B gap
Regulators believe the bank needs to significantly boost its capital to withstand the economic downturn, reports say.
Last Updated: May 6, 2009: 8:05 AM ET
NEW YORK (CNNMoney.com) -- The U.S. government isn't due to reveal the results of its stress tests on banks until Thursday, but leaked results are painting a troubling picture.
Regulators have determined that Bank of America (BAC,Fortune 500) may need roughly $34 billion in capital to weather a more painful economic environment, several reports published late Tuesday said, citing sources familiar with the results.
Bank of America officials were not immediately available for comment Wednesday morning.
The Charlotte, N.C.-based lender has received extensive assistance from the government to date, taking in $45 billion in taxpayer funds. Nearly half of that amount was injected into the firm earlier this year after the company realized the enormity of the losses it faced as a result of its purchase of Merrill Lynch last fall.
The new reports, however, suggested that Bank of America would not necessarily need to raise $34 billion in new capital. Rather, the bank may bolster its position simply by converting the government's preferred share stake into common stock.
Such a move, however, would severely dilute the bank's existing common shareholders. To offset that, Bank of America is believed to be considering the sale of certain assets, including its stake in China Construction Bank.
The government's view that Bank of America needs to shore up its capital position is likely to add pressure on Bank of America's chief executive Ken Lewis, who was ousted as chairman of the struggling bank last week.
Regulators are due to officially release the results of their so-called stress tests on 19 of the largest U.S. banks after the closing bell on Thursday.
In the run-up to the official release, speculation has been brewing that anywhere between 10 and 14 of the banks could be forced to boost their capital.
Attention has been focused particularly on Bank of America and Citigroup (C, Fortune 500) which is believed to face an approximately $10 billion gap, according to reports.
Regional banks -- including Birmingham, Ala.-based Regions Financial (RF, Fortune 500), Cincinnati's Fifth Third Bank (FITB, Fortune 500) and SunTrust Financial (STI, Fortune 500) of Atlanta -- are also widely believed to need more funding
JPMorgan Chase
Total assets: $2.17 trillion
TARP money received: $25 billion
2008 results: $5.6 billion in profits
Citigroup
Total assets: $1.95 trillion
TARP money received: $50 billion
2008 results: $18.7 billion in losses
Bank of America
Total assets: $1.82 trillion
TARP money received: $45 billion
2008 results: $2.56 billion in profits
Wells Fargo
Total assets: $1.31 trillion
TARP money received: $25 billion
2008 results: $2.56 billion in profits
Goldman Sachs
Total assets: $885 billion
TARP money received: $10 billion
2008 results: $2.32 billion in profits
Morgan Stanley
Total assets: $659 billion
TARP money received: $10 billion
2008 results: $1.59 billion in profits
MetLife
Total assets: $502 billion
TARP money received: none
2008 results: $3.08 billion in profits
PNC
Total assets: $291 billion
TARP money received: $7.6 billion
2008 results: $882 million in profits
U.S. Bancorp
Total assets: $267 billion
TARP money received: $6.6 billion
2008 results: $2.82 billion in profits
Bank of New York Mellon
Total assets: $238 billion
TARP money received: $3 billion
2008 results: $1.39 billion in profits
GMAC
Total assets: $189 billion
TARP money received: $6 billion
2008 results: $1.9 billion in profits
SunTrust
Total assets: $189 billion
TARP money received: $4.85 billion
2008 results: $747 million in profits
State Street
Total assets: $177 billion
TARP money received: $2 billion
2008 results: $1.62 billion in profits
Capital One
Total assets: $166 billion
TARP money received: $3.55 billion
2008 results: $78.7 million in losses
BB&T
Total assets: $152 billion
TARP money received: $3.13 billion
2008 results: $1.49 billion in profits
Regions Financial
Total assets: $146 billion
TARP money received: $3.5 billion
2008 results: $5.6 billion in losses
American Express
Total assets: $126 billion
TARP money received: $3.39 billion
2008 results: $2.63 billion in profits
Fifth Third Bancorp
Total assets: $120 billion
TARP money received: $3.41 billion
2008 results: $2.2 billion in losses
KeyCorp
Total assets: $105 billion
TARP money received: $2.5 billion
2008 results: $1.5 billion in losses
Comment:
The "Foxes" of Wall Street are presiding over the "Hen House" stress tests.
Methinks the spin will be to rewrite the rules of TARP repayment and to show more is needed to keep the "Houses of Ill-repute" in business.
Good Luck to all!
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