Wells Fargo told to raise money
Monday, May 04, 2009
NEW YORK — Regulators have told Wells Fargo & Co. to shore up its finances after U.S. government “stress tests” showed the bank would have trouble surviving a deeper recession.
Wells Fargo is one of several banks that regulators will force to hold larger buffers to protect them against possible future losses, according to two people familiar with the matter who spoke on condition of anonymity because of the sensitivity of the process.
Representatives from San Francisco-based Wells Fargo did not immediately respond to requests for comment Monday morning.
Bank of America Corp., denying a media report, said it had no plans to raise $10-billion in common equity, while another report said Citigroup Inc. was looking to raise capital from private investors.
The three are among the 19 U.S. banks undergoing a government “stress test” designed to ensure they each have sufficient capital to withstand a deep recession.
Bank of America, the largest U.S. bank that has received $45-billion in taxpayer funds, denied a Financial Times report it plans to raise $10-billion in common equity.
Citigroup, which has received $45-billion in U.S. taxpayer funds, was looking to raise any additional capital it needed from private investors, according to a Bloomberg report.
Citigroup did not return telephone calls seeking comment on the matter.
U.S. bank shares were higher Monday after analysts said the government stress tests would show most institutions would need less new capital than previously feared.
The Financial Times reported Monday that Bank of America was preliminarily found to need more than $10-billion of capital and the bank was working on plans to raise fresh funds.
“The Financial Times report is completely inaccurate. Bank of America has not been given a final number by the Federal Reserve. The bank is not working on plans to raise $10-billion in common equity,” said Scott Silvestri, a spokesman for the bank.
Regulators have told Citigroup it will not need another injection of taxpayer funds, Bloomberg reported, citing one person familiar with the matter.
Citigroup did not return telephone calls seeking comment on the report.
The bank's discussions with the government are focused on how much of the government's preferred stock investment must be converted into common shares, according to the Bloomberg source.
Private investment might help Citi prevent the government from converting all or part of its $27-billion investment, Bloomberg said. Conversion could give the government more than 50 per cent ownership of the bank.
The amount of capital Citi would need to raise after the test results are finalized would likely be manageable if the bank needed to boost its equity at all, people familiar with the matter told Reuters Friday.
The bank has multiple ways to raise common equity, including expanding its plans to allow investors to swap up to $52.5-billion of preferred shares for common stock, and selling assets.
These measures are expected to be sufficient to meet any capital the government ultimately presses Citigroup to raise, the people familiar with the matter said Friday.
AI
