Banks drop on stress test concern – Citi logo
Tuesday, 28 April 2009
The tests aimed to establish whether a bank has sufficient cash reservesShares in Citigroup and Bank of America have fallen after a
report said regulators had told the banks they may need to raise further capital.
The results of so-called “stress tests” showed they may need additional capital to shore up their balance sheets, the Wall Street Journal said.
Bank of America shares were down 5.9% while Citigroup lost 5.2% in morning trading in New York.
Bank of America declined to comment. Citi were not immediately available.
On Friday, financial regulators told the 19 largest banks in the US how they performed in the “stress tests”, although the results will not be made public until 4 May.
The tests aimed to establish whether a bank has sufficient cash reserves to cope if the recession worsens and are not designed to be a measure of a bank’s solvency.
The Federal Reserve has said that most banks held enough capital.
BBC NEWS | Business | Banks drop on stress test concern.
BofA, Citi Fall On Report They May Need To Raise More Capital – Dow Jones
By Donna Kardos
APRIL 28, 2009NEW YORK (Dow Jones) — Shares of Bank of America Corp. (BAC) and Citigroup Inc. (C) fell
Tuesday, amid a Wall Street Journal report that regulators told the banking giants they may need to raise more capital based on early results of the stress tests.
The report, citing people familiar with the situation, said the capital shortfall amounts to billions of dollars at Bank of America.
“Obviously it has to do with the government implying that there’s going to have to be some more capital raising,” Raymond James analyst Anthony Polini told Dow Jones Newswires. “The biggest fear is dilution to common stockholders due to the forced conversion of the government preferred shares.”
… The Journal report said executives at Bank of America and Citi are objecting to the preliminary findings, which emerged from the government’s scrutiny of 19 large financial institutions. The two banks are planning to respond with detailed rebuttals, the Journal said, citing the people familiar with the situation.
Bank of America declined to comment.
While Citi noted in a statement its regulators “have prohibited all financial institutions, including Citi, from making any comments related to the stress tests,” it added, “Citi’s regulatory capital base is strong, and we have previously announced our intention to conduct an exchange offer that will significantly improve our tangible common ratios. We continue to focus and make progress on reducing the assets on our balance sheet, reducing expenses and streamlining our business for future profitable growth.”
Last part if this was CITI noting that they are “Prohibited” from making comments on Stress Tests results… joe
