Four large U.S. banks which passed the U.S. government’s economic stress test last week announced plans today to sell up to $6.5 billion in common stock to the public and repurchase preferred stock and warrants issued by the Treasury department under the TARP financial bailout.
The banks - which include The Bank of New York Mellon Corp., Capital One Financial Corp., U.S. Bancorp and BB&T Corp – made the announcements today. Their shares, respectively, fell 8.9 percent, 13.5 percent, 10 percent and 7.6 percent as part of a broader drop in U.S. financial shares.
The banks were among the 9 of 19 banks which demonstrated no need for an additional capital buffer to withstand a more severe economic crisis, according to test results issued by U.S. regulators last week.
The Bank of New York Mellon Corp announced plans to sell $1 billion of its common stock to the public. Capital One Financial will offer to sell about $1.5 billion in stock based on its closing share price today. U.S. Bancorp is selling about $2.5 billion while BB&T Corp will sell $1.5 billion.
Each bank is giving the underwriters a 30-day period to sell an additional 15 percent in stock to cover over-allotments.
After raising the funds, the banks will formally notify the U.S. Treasury Department of their intention to repurchase preferred stock and warrants.