Stressed banks to start selling shares
Three companies have announced plans to sell shares in order to repay government bailout funds, after stress tests showed the institutions had enough capital to sustain themselves in a worsened economy without additional aid, Bloomberg reported.
Capital One Financial Corp., U.S. Bancorp and BB&T Corp. were among the 19 banks that were examined as part of the federal government’s “stress test,” which found 10 lenders needed to raise a total of $74.6 billion in capital.
Capital One said it would sell 56 million shares of common stock, U.S. Bancorp plans to sell a total of $2.5 billion in stock and BB&T has begun a public offering of $1.5 billion of common stock.
Both U.S. Bancorp, which must repay $6.6 billion in Troubled Asset Relief Program (TARP) funds, and BB&T, which received $3.1 billion, emphasized they wanted to repay the government as quickly as possible.
“We firmly believe this action is in the long-term best interests of our shareholders and our company because of the risk and uncertainty associated with being a TARP participant,” BB&T CEO Kelly King said in a statement.
Additionally, KeyCorp, which was told it needed $1.8 billion in capital as a result of the stress test, said it plans to sell as much as $750 million in common shares. Wells Fargo & Co., which was told it needed to boost its capital by $13.7 billion, said it raised $8.6 billion in capital as a result of selling shares last week.
Morgan Stanley also raised $8 billion by selling stock and debt last week. The stress test indicated it would need $1.8 billion in additional capital to buffer against future losses.