THE EVENT: The Treasury Department is directing 10 of the
nation's 19 biggest banks to boost their capital levels by a
combined $75 billion, as a result of the government's stress
tests.
The Treasury released the much-anticipated results late
Thursday, with Bank of America Corp. (BAC), Wells Fargo & Co.
(WFC) and GMAC LLC being instructed to raise the most capital.
JPMorgan Chase & Co. (JPM), American Express Co. (AXP) and
Goldman Sachs Group Inc. (GS) were among the financial institutions
deemed to not need fresh capital.
Meanwhile, banks began announcing plans to raise cash
Thursday.
Treasury Secretary Timothy Geithner, in a press conference, said
he was "reasonably confident" the banks could raise the needed
capital. Federal Reserve Chairman Ben Bernanke said the results
should provide "considerable comfort" about the health of the
banking system.
THE DETAILS: The Treasury said that losses at the 19 banks in
2009 and 2010 could be $600 billion under the government's scenario
of a deepening economic downturn. Mortgage and consumer loans could
account for 70% of potential losses.
The following institutions were directed to raise capital:
* Bank of America Corp. (BAC) $33.9 billion
* Wells Fargo & Co. (WFC) $13.7 billion
* GMAC LLC $11.1 billion
* Citigroup Inc. (C) $5.5 billion
* Regions Financial Corp. (RF) $2.5 billion
* SunTrust Banks Inc.(STI) $2.2 billion
* KeyCorp (KEY) $1.8 billion
* Morgan Stanley (MS) $1.8 billion
* Fifth Third Bancorp (FITB) $1.1 billion
* PNC Financial Services (PNC) $600 million
These institutions were deemed not to need new capital:
* JPMorgan Chase & Co. (JPM)
* American Express Co. (AXP)
* Goldman Sachs Group Inc. (GS)
* Bank of New York Mellon Corp. (BK)
* MetLife Inc. (MET)
* Capital One Financial Corp. (COF)
* State Street Corp. (STT)
* BB&T Corp. (BBT)
* U.S. Bancorp (USB)
MARKET REACTION: Financial stocks closed lower Thursday, along
with the broader market, as investors awaited the release of the
test results. But most of the stocks involved in the stress tests
rose after hours, as the end to the intense investigation into
banks' books brought relief. Fifth Third jumped 23%, Bank of
America rose 9.4%, State Street gained 7.2%, and Citigroup rose
6.8%.
The Dow Jones Industrial Average closed 1.2% lower at 8410, the
S&P 500 lost 1.3% to 907, and the Nasdaq Composite fell 2.4% to
1716.
Treasurys fell hard Thursday, driven by a poor $14 billion
30-year bond auction. Selling intensified after the auction,
pushing the 10-year and 30-year yield to the highest levels since
November.
Crude-oil futures ended higher, as expectations of stronger
summer gasoline demand supported prices.
WHAT IT MEANS: The Treasury directives come after the
government's weeks-long exercise testing how the 19 banks would
fare under darker economic scenarios. Bernanke said the tests
weren't "tests of solvency."
The banks that need capital will have until June 8 to develop a
detailed plan for how they will raise any new required capital, the
Fed and other bank regulators said Wednesday, and until Nov. 9 to
implement that plan.
WHAT'S NEXT: U.S. officials stressed that the move to bolster
capital needs to occur across the banking industry, not just at the
largest firms. Geithner said the department will reopen existing
programs to make capital available to banks of all sizes,
suggesting the government's intervention in the financial markets
could go on longer than expected.
The following are key stories:
-US Treasury: 10 Of 19 US Banks Need To Raise $75B In Capital
Financial Cos Scramble To Raise Cash, Meet Stress Test Rules
STRESS TEST: CEOs Outline Capital-Raising Plans, Way Forward
Amounts Of Capital Raises Vary Widely For 10 US Banks
Citi CFO: Bank Differed With Government's Revenue Estimate
American Express CFO: Won't Use Common Equity To Repay TARP
STRESS TEST: GMAC Shortfall May Lead To Bigger Government Role
-IN THE MONEY: Arbs Bet Banks Will Use Stock Swaps To Get Cash
-IN THE MONEY: What Tier 1 Common Cap Shows About The Banks
-STRESS TESTS: Government Using Little-Known Capital Measure
-STRESS TESTS: Regional Banks Might Face More Pitfalls
-STRESS TESTS: MetLife's Insur Strength Carries Along Its Bank
-Financials Erase Gains Before Stress-Test Results
-Bernanke: Hopes Stress Tests Add To Mkt Confidence
-Budget Projects $91B In Losses From US Bank Failures In '09-10