Several large U.S. banks undertook big capital-raising efforts on Tuesday, hoping to satisfy regulators who want bigger cushions 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 healthy enough 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 (from clients) that it would differentiate us if we were able to get out.
Ten of the 19 large banks that underwent stress tests were ordered last week 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.
Federal Deposit Insurance Corp Chairman Sheila Bair said on Tuesday the release of stress test results was a catalyst for capital raising by banks. She added that while the banking industry is gaining a better footing, there's still some more pain to go.
Bank of America has said it plans to plug roughly half its $33.9 billion capital shortfall by issuing new common stock, and to make up the rest through asset sales and other means.
The bank sold just over 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 stock 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 Tuesday trading, Bank of America shares fell 5.3 percent to $12.26, U.S. Bancorp fell 3.3 percent to $17.89, Bank of New York Mellon fell 3.8 percent to $28.43, BB&T fell 7.6 percent to $22.50, and KeyCorp fell 4.5 percent to $6.00.
(Reporting by Michael Flaherty and Jonathan Stempel; Editing by Tim Dobbyn, Gerald E. McCormick and Steve Orlofsky)