Preliminary Stress Test Results

Inquiring minds are taking a look at preliminary results from the stress tests. Actual results will be out tomorrow. In the meantime, please consider the following headlines.

Citigroup Said to Need About $5 Billion in Capital After Test

Citigroup Inc. was judged to need roughly $5 billion in additional capital as a result of regulators’ stress test on the bank, according to a person familiar with the matter.

The Federal Reserve is scheduled to release the results of the tests on the 19 largest U.S. banks tomorrow. Citigroup’s assessment incorporates the New York-based bank’s previously announced plan to convert government-owned and privately held preferred shares into common stock. Citigroup spokesman Jon Diat declined to comment.

MetLife Said to Have No New Capital Need After U.S. Stress Test

MetLife Inc. was judged not to need to raise additional capital after regulators completed their stress test on the bank, according to a person familiar with the matter.

The Federal Reserve is scheduled to release the results of the tests on the 19 largest U.S. banks tomorrow. MetLife spokesman Christopher Breslin declined to comment.

Morgan Stanley Said to Have No New Capital Need After U.S. Test

Morgan Stanley was judged not to need to raise additional capital after regulators completed their stress test on the bank, according to a person familiar with the matter.

The Federal Reserve is scheduled to release the results of the tests on the 19 largest U.S. banks tomorrow. Morgan Stanley spokeswoman Jeanmarie McFadden in New York declined to comment.

GMAC Is Said to Need $11.5 Billion in Capital After Stress Test

GMAC LLC requires about $11.5 billion in new capital as a result of regulators’ stress test on the auto and home lender’s balance sheet, according to a person familiar with the matter.

Regulators have said options open to lenders include converting existing government preferred shares. The company’s capital needs may be at least in part addressed in conjunction with the government’s broader efforts to aid the auto industry, the person said.

The Detroit-based company yesterday reported a first- quarter loss of $675 million on surging loan defaults and the elimination of a one-time gain from extinguishing debt.

Gina Proia, a GMAC spokeswoman, declined to comment.

Amex, JPMorgan, Bank of New York Mellon pass tests

American Express Co., JPMorgan Chase & Co. and Bank of New York Mellon Corp. will not be asked to raise more capital when federal officials announce the test results Thursday afternoon, according to people briefed on the results. The people requested anonymity because they were not authorized to discuss the results.

Goldman Sachs Said to Have No New Capital Need After Stress Test

Goldman Sachs Group Inc. was deemed not to need to raise additional capital after regulators completed their stress test on the bank, according to a person familiar with the matter.

The Federal Reserve is scheduled to release the results of the tests on the 19 largest U.S. banks tomorrow. Goldman spokesman Lucas van Praag in New York declined to comment.

Big banks need capital under stress tests

Regulators are ordering the largest U.S. banks to get tens of billions of dollars of capital to cushion themselves in the event of a deep economic downturn.

After conducting "stress tests" of the 19 biggest banks, the government has told Bank of America Corp it needs $34 billion of capital, roughly triple what had been expected, an industry source familiar with the results said.

Wells Fargo & Co needs $15 billion, Bloomberg News said, citing an unnamed source. Citigroup Inc may need as much as $10 billion, a person familiar with the matter said. About 10 of the 19 banks that were tested may need capital, a person familiar with the official talks said.

The sources were not authorized to speak because the stress test results are not public. Results are due late Thursday.

Analysts believe other banks that may need capital include Fifth Third Bancorp, GMAC LLC, KeyCorp, PNC Financial Services Group Inc, Regions Financial Corp and SunTrust Banks Inc.

Wells Fargo Said to Need $15 Billion in New Capital

Wells Fargo & Co., the fourth-largest U.S. bank by assets, requires about $15 billion in new capital as a result of regulators’ stress test on the lender, according to a person familiar with the matter.

Regulators have said options open to lenders include converting existing government preferred shares; Wells Fargo got $25 billion in taxpayer funds last year. As part of the stress tests on the 19 largest banks, officials are assessing whether banks have enough common equity, among other capital measures.

Wells Fargo’s assessment compares with the $34 billion gap at Bank of America Corp. identified by people familiar with the matter late yesterday. JPMorgan Chase & Co. doesn’t need to raise its capital, people with knowledge of its results said, while Goldman Sachs Group Inc. and Bank of New York Mellon Corp. have taken actions that suggest they also passed their reviews.

Geithner Says Banks’ Stress-Test Results Will Be ‘Reassuring’

Treasury Secretary Timothy Geithner said none of the 19 banks subjected to government stress tests are insolvent, which should reassure investors and the public that the U.S. financial system is sound.

While some banks will need to raise more capital, there are a number of ways they can do that and most should be able to do it in the private sector, Geithner said yesterday in an interview with Charlie Rose.

“I think the results will be, on balance, reassuring,” Geithner said. “None of those 19 banks are at risk for insolvency.”

Geithner, speaking in Washington, said he expects the “vast bulk” of banks will be able to raise needed capital “through private sources” instead of getting government financing.

“There is very significant cushions in these institutions today, and all Americans should be confident that these institutions are going to be viable institutions going forward,” Geithner said. “What we want to do is make sure that people have confidence that our financial system is going to be able to get through this and going to be able to lend.”

The government will take larger stakes in the banks, either by adding capital or converting preferred shares, “if necessary,” Geithner said, “but we’ll be reluctant to do that” and “we’ll get out as quickly as possible.”

He did not rule out forcing management changes at banks in which the government has a sizeable holding.

Geithner's Lie

Geithner says he expects the “vast bulk” of banks will be able to raise needed capital “through private sources” instead of getting government financing.

He is talking about the Public Private Investment Plan (PPIP) in which investors take 7% risk and taxpayers take 93% of the risk. For more on this line of thinking, please see Geithner's Plan Can Succeed and More Ugly Details Emerge On "Geithner's Heist America Plan"
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Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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