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Largest US banks are asking for additional capitalization

29 April 2009

Largest American banks - Bank of America Corp. and Citigroup Inc. are asking for additional capitalization. Results of stresses-tests of the largest banks of the USA have showed lack of capitalization. Some regional banks also will face capital shortage.
As The Wall Street Journal marks, results of stresses-tests regulators recommended Citigroup and Bank of America to increase their capital. In particular, according to the edition, capital deficiency of Bank of America makes billion dollars.
However, the management of both banks does not agree with preliminary results of the stress-tests.
According to the results of the first quarter, 2009, Bank of America has shown the profit, which has repeatedly exceeded forecasts. bank’s net profit has grown 3,5 times and has reached $4,25 billion in comparison with $1,21 billion in the first quarter of last year.
The third on size the American bank Citigroup Inc. has shown losses in size less than $1 billion, however, these results became good news as losses reduced more than on $4 billion in comparison with the similar period of last year. Aggregate profits have grown almost twice - up to $24,79 billion though analysts predicted only $21,73 billion.
During crisis these credit organizations have got the governmental support in $95 billion.
American regulators have spent special stresses-tests to define financial stability of banks. Earlier US Federal reserve system informed, that level of the capital of the majority of the banks, which were tested, is sufficient to consider these banks as well capitalized. However, according to FRS, substantial damages have essentially lowered capitalization and have affected crediting.
Experts and investors predict that some regional banks, especially those, in which portfolios great volume of the credits provided with the commercial real estate, will show extremely negative results of stresses-tests. Such American banks as Regions Financial Corp., Fifth Third Bancorp and Wells Fargo and Co.Major need additional capitalization.


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