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Wednesday, May 6, 2009

Bank of America to need $34 billion in capital: source

Wed May 6, 2009 4:53am EDT

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By Karey Wutkowski and Jonathan Stempel

WASHINGTON/NEW YORK (Reuters) - Bank of America Corp has been deemed to need as much as $34 billion in additional capital, according to the results of a government stress test, a source familiar with the results told Reuters late on Tuesday.

Bank of America spokesman Scott Silvestri declined comment.

A possible $34 billion capital shortfall is certain to increase pressure on CEO Kenneth Lewis, who was last week ousted by shareholders as chairman of the biggest U.S. bank.

That ouster could lay the groundwork for Lewis's eventual departure from the company he worked at for 40 years, including the last eight as chief executive.

It may also unnerve investors who had hoped the results of the stress tests on Bank of America and 18 other banks might show the industry was in less dire condition than had been feared. Shares of major U.S. banks have nearly doubled since bottoming out in early March.

U.S. equity market futures extended losses on Wednesday and the yen gained following the news.

About 10 of the 19 banks being stress-tested are expected to need more capital buffers, a person familiar with the official talks has said. The person was not authorized to speak because the results are not public.

Many analysts have speculated that other banking companies that may need more capital, either because they do not have enough tangible common equity or are experiencing rising loan losses, include Citigroup Inc, Wells Fargo & Co, Fifth Third Bancorp, GMAC LLC, KeyCorp, Regions Financial Corp and SunTrust Banks Inc.


The government has spent three months conducting stress tests on the 19 largest U.S. banks to determine their revenue, losses and capital needs, should economic conditions deteriorate even further than many economists expect.

Officials plan to release results of the tests late on Thursday, and are expected to reveal both aggregate and individual banks' figures.

Bank of America has been at the top of the list of those believed to need more capital, as it faces significant credit losses and a controversial takeover of Merrill Lynch & Co, which closed on January 1.

The $34 billion figure more than triples previously published reports of Bank of America's capital needs.

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