NEW YORK (Reuters) – Bank of America Corp (BAC.N), JPMorgan Chase & Co (JPM.N) and several other banks said they have raised more than $19 billion as lenders scramble to extricate themselves from Washington's grip.
Lenders are trying to show regulators they are capable of functioning without government support. The Federal Reserve will announce next week which of the 19 big lenders that underwent "stress tests" will be allowed to repay government bailout funds.
"Markets are providing an avenue for banks of all sizes and stripes to raise money unless you are at death's door," said Gary Townsend, co-founder of Hill-Townsend Capital in Chevy Chase, Maryland. "The market also seems to be making an assessment that credit problems are manageable and that the environment is improving. In my view, that is correct."
JPMorgan sold $5 billion of stock, Morgan Stanley (MS.N) $2.2 billion and American Express Co (AXP.N) $500 million at a discount to Monday's prices after the Fed imposed new capital-raising requirements on large banks hoping to repay the Treasury Department's Troubled Asset Relief Program.
Goldman Sachs Group Inc (GS.N), which also hopes to exit TARP, sold $1.9 billion of its stake in Industrial and Commercial Bank of China (601398.SS) (1398.HK).
Meanwhile, Bank of America said it has raised close to $33 billion since early May, including $7 billion over six days, closing nearly all of the $33.9 billion capital shortfall that regulators found through its stress test. The largest U.S. bank said it expects to "comfortably exceed" that sum.
Also, KeyCorp (KEY.N) said it has raised $1.3 billion, including $1 billion from selling stock, to help plug a $1.8 billion shortfall, while SunTrust Banks Inc (STI.N) late Monday sold $1.4 billion of stock to help fill a $2.2 billion hole.
Of the 19 banks to undergo stress tests that assessed their readiness for a deep recession, 10 were ordered to raise $74.6 billion. The others had enough capital.
American Express shares closed down 4.9 percent to $24.71, Bank of America rose 1.8 percent to $11.41, Goldman fell 0.8 percent to $143.13, JPMorgan fell 4.5 percent to $34.50, KeyCorp rose 1.7 percent to $4.82, Morgan Stanley rose 0.7 percent to $30.09 and SunTrust rose 15.5 percent to $15.94.
NEW RULES
The Fed said large banks hoping to repay TARP must show an ability to access public equity markets, sell long-term debt without government backing, lend sufficiently, meet their funding obligations and support their subsidiaries.
American Express, Bank of New York Mellon Corp (BK.N), BB&T Corp (BBT.N), Goldman, JPMorgan, Morgan Stanley, State Street Corp (STT.N) and U.S. Bancorp (USB.N) have signaled their intent to repay the government, people familiar with the matter have said. Some of the requests have not been made public.
Many banks have complained about the increased government scrutiny and pay restrictions that accompany TARP funds. To free themselves from Washington, banks still need to buy back or get rid of government warrants to buy their shares.
"For any bank that can raise capital and pay off TARP, they should so they can get the government out of their hair," said Joseph Gordon, president of Gordon Asset Management LLC in Durham, North Carolina.
Repaying TARP could leave banks "free and clear, like a real American free citizen, corporate citizen, like we were in the past," JPMorgan Chief Executive Jamie Dimon said on a conference call on Monday.
More than 600 banks took TARP money, and about 20 have paid it back, Treasury Department data show.
American Express took $3.4 billion, Bank of America $45 billion, Bank of New York Mellon $3 billion, BB&T $3.1 billion, Goldman $10 billion, JPMorgan $25 billion, KeyCorp $2.5 billion, Morgan Stanley $10 billion, State Street $2 billion, SunTrust $4.9 billion and U.S. Bancorp $6.6 billion.
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