Tierful markets

5 May 2009 By Antony Currie Follow @AntonyMCurrie

The market should be the ideal place to digest all the analysis, guesstimates, rumours and leaks on which banks may be short of capital. Pricetobook value multiples imply that seven firms may need more. But with test parameters still unknown, even this measure could be off.

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The 19 largest US banks by assets were due to receive final word of the results of government stress tests on May 5. Results are due to be made public on Thursday May 7.

Various estimates of how much capital different banks will need to raise are circulating. Media reports state that 10 of the banks may need more capital. Bank of America is expected to need $34bn. Some claim that Citigroup may have to raise $10bn. Other firms mentioned as possibly needing capital include Wells Fargo and PNC.

FBR analyst Paul Miller reckons 11 of the 12 commercial banks will need to raise capital, based on an assumption all will need their ratio of tangible common equity to riskweighted assets to be above 4%.

Following the stress tests results, Bank of America may need up to $35bn, Citigroup $56bn, GMAC $11.5bn, Wells Fago $15bn, according to news reports.

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