The results of the US banking
stress tests have adjudged 10 of the 19 banks surveyed to be in
need of extra capital totalling $75 billion, with Bank of America
alone required to raise $33.9 billion.
The other capital shortfalls amounted to
$13.7 billion at Wells Fargo; $11.5 billion at GMAC; $5.5 billion
at Citigroup; $2.5 billion at Regions Financial; $2.2 billion at
SunTrust; $1.8 billion at Morgan Stanley; $1.8 billion at KeyCorp;
$1.1 billion at Fifth Third; and $600 million at PNC Financial.
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American Express, Bank of New York Mellon,
BB&T, Capital One, Goldman Sachs, JPMorgan Chase, MetLife,
State Street and US Bank were found to require no additional
funding.
The resultant rush to raise extra capital
has, however, involved banks on either side of the divide: US Bank,
Capital One and BB&T all announced on 11 May that they would
raise funds. BB&T also announced it would cut its dividend and
repay all the capital it received from the US Treasury’s Troubled
Asset Relief Program.
Under an economic scenario “more adverse”
than the current consensus – defined as a 2009 GDP contraction of
3.3 percent, unemployment rate of 8.9 percent and a 22 percent fall
in house prices, with limited recovery in 2010 – the tests found
that credit card losses at most major issuers would exceed 20
percent of total loan portfolios.
At Wells Fargo, credit card losses would
amount to 26 percent of its loan book, with mortgage losses
constituting $32.4 billion for first lien loans and $14.7 billion
for second lien loans, the results predicted.
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By GlobalDataBank of America, meanwhile, would lose
$22.1 billion on first lien mortgages, $21.4 billion on second lien
mortgages and $19.1 billion on credit card loans under the more
adverse scenario.
The survey warned that under the same
scenario, total losses at the 19 firms over the course of 2009 and
2010 could reach $600 billion, the bulk of this figure coming from
residential mortgages and other consumer-related loans.
