Analyst: Banks might need more capital

Potential accounting changes that would require banks to take off-balance sheet entities and add them to balance sheets could "cause further strain on already burdened capital levels," analyst Keith Horowitz wrote in a note released Monday night.

Horowitz said the affect of bringing these assets onto balance sheets hinges on the Federal Reserve and how it weights the riskiness of the assets. That will go a long way in determining if banks are forced to raise new cash or cut dividends in an effort to meet federally mandated capital ratios.

Banks have been strained in recent months because of rising losses tied to a spike in defaults among mortgages and other types of loans. As defaults have increased, banks have been forced to reserve more cash to cover the losses. With the losses mounting, capital ratios have declined, forcing some banks to raise new money to shore up balance sheets.

Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. could potentially have to take the most capital onto balance sheets because of the accounting change, the analyst said. But, he cautioned with few details about the accounting changes and the fact they are only proposals and not yet mandatory makes the magnitude of potential changes to balance sheets uncertain.

Horowitz said those companies are most likely to face change because of the new accounting rules because they were among the largest securitizers of mortgage-backed securities.

Shares of all banks rose sharply in Wednesday afternoon as the broader market advanced.

Bank of America shares added 65 cents, or 2.6 percent, to $27.28.

JP Morgan shares rose $1.17, or 3.1 percent, to $38.85.

Shares of Wells Fargo rose 64 cents, or 2.4 percent, to $25.81.