Several large U.S. banks undertook big capital-raising efforts on Tuesday, hoping to satisfy regulators who want to see a bigger cushion against a deep recession, or proof that they have enough of a buffer already.
Bank of America Corp
Meanwhile, U.S. Bancorp
Unlike Bank of America, both were deemed in U.S. government stress tests to have sufficient capital buffers. BB&T Corp
Dozens of lenders are hoping to convince regulators that they can withstand a steep economic downturn, or are ready to repay money from the $700 billion Troubled Asset Relief Program.
TARP was designed to spur lending, but banks now consider it a burden because it imposes too many restrictions, including some on pay, and suggests that recipients are weak.
Bank of America took $45 billion from TARP, U.S. Bancorp $6.6 billion, BB&T $3.1 billion and Bank of New York Mellon $3 billion. Lenders say it is up to regulators to decide when money can be repaid. The government does not want banks to repay funds, only to find later that they need more.
It is now a negative to have TARP, Bank of New York Mellon Chief Executive Robert Kelly said at a UBS financial services conference. When I was traveling in the Middle East, Asia and in Europe over the past couple of months ... I got a pretty clear message that it would differentiate us if we were able to get out.
Ten of the 19 banks to undergo stress tests were told to raise $74.6 billion of capital to ward off a potentially severe downturn. Many banks said they do not expect conditions to sour as much. Standard & Poor's on Tuesday said the 19 banks might together need to raise only $18 billion.
Bank of America last week said it plans to plug roughly halve its $33.9 billion capital shortfall by issuing new common stock and make up the rest through asset sales and other means.
The bank sold a little more than one-third of its roughly 16.7 percent China Construction Bank stake to investors including Singapore's state-run Temasek Holdings
Bank of America owns other shares in the Chinese bank that it cannot sell before August 29, 2011. Chief Executive Kenneth Lewis said on Monday: We always want to have a very large ownership position.
Separately, U.S. Bancorp's $2.5 billion stock sale comprised 139 million shares at $18 each. Bank of New York Mellon's $1.2 billion sale, 20 percent larger than expected, comprised 42 million shares at $28.75 each.
The shares priced at 3 percent discounts to Monday closing prices, which is normal for offerings of additional shares.
Wells Fargo & Co
Capital One Financial Corp
In afternoon trading, Bank of America was down 5.6 percent at $12.22, U.S. Bancorp was down 4.1 percent to $17.74, Bank of New York Mellon was down 2.7 percent to $28.74, BB&T was down 5.4 percent to $23.03, and KeyCorp was down 3.3 percent to $6.07.
(Reporting by Jonathan Stempel; Editing by Tim Dobbyn and Gerald E. McCormick)