From: "Daniel Glover" <[EMAIL PROTECTED]>
Date: June 17, 2008 11:39:47 PM PDT
To: <[EMAIL PROTECTED]>, <[EMAIL PROTECTED]
>
Subject: [IPCUSA] U.S. banks may need $65 bln new capital: Goldman
Reply-To: [EMAIL PROTECTED]
U.S. banks may need $65 bln new capital: Goldman
http://news.yahoo.com/s/nm/20080617/bs_nm/banks_capital_goldman_dc_1
By Jonathan Stempel Tue Jun 17, 3:35 PM ET
BANGALORE (Reuters) - U.S. banks may need to raise $65 billion of
additional
capital to cope with mounting losses from a global credit crisis
that will
not peak until 2009, Goldman Sachs & Co (GS.N) analysts said on
Tuesday.
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The new capital would be on top of $120 billion already raised by the
industry, analysts led by Richard Ramsden said.
"Banks will not turn until a peak in credit costs is in sight," the
analysts
wrote. "Moreover, weaker banks are unlikely to benefit from
consolidation as
bank deals always slow when credit is deteriorating and larger banks
are
hamstrung by their own problem assets as well as accounting
requirements."
Goldman said it lowered its price targets for 14 banking companies
and cut
its 2008 earnings-per-share forecasts for 11.
Among the banks for which Goldman cut both are BB&T Corp (BBT.N), PNC
Financial Services Group Inc (PNC.N), SunTrust Banks Inc (STI.N), U.S.
Bancorp (USB.N) and Wells Fargo & Co (WFC.N).
Goldman also lowered its price targets for Wachovia Corp (WB.N) and
Washington Mutual Inc (WM.N), and its earnings outlook for Bank of
America
Corp (BAC.N).
In afternoon trading, the 24-member KBW Bank Index (.BKX) was down 3.2
percent, while the 50-member KBW Regional Bank Index (.KRX) dropped
2.6
percent. These contributed to declines in broader market indexes as
well.
Zions Bancorp (ZION.O), a Salt Lake City-based bank, fell as much as
12.8
percent after projecting higher nonperforming assets and saying
weakness in
residential construction and land values in the U.S. Southwest should
persist into 2009. Goldman also cut Zions' price target and earnings
forecast.
Lenders have raised capital to help combat a surge in problem loans.
Among
those to raise the most were Citigroup Inc (C.N), Wachovia, Washington
Mutual and National City Corp (NCC.N), which this year each raised
at least
$7 billion.
Problem loans were once concentrated in subprime mortgages. They have,
however, been spreading to other types of lending, including prime
mortgages, home equity loans, commercial real estate and
construction loans,
auto loans and credit cards.
BANKS SET ASIDE $86 BILLION
The Goldman analysts estimated that U.S. banks and thrifts have set
aside
$86 billion for loan losses in the three quarters since the credit
crisis
began.
They said the weak housing market drove the deterioration and that
home
prices will likely keep falling all year. It expects credit losses
to peak
in the first quarter of 2009, when the rate of charge-offs may be 46
percent
higher than a year earlier.
Worries about credit losses have driven down banks' share prices.
This has
caused paper losses for many investors who infused capital into the
industry, including many private equity firms and sovereign wealth
funds.
Much of this capital has come from offerings of common stock or
convertible
preferred shares. Goldman said further attempts to raise capital may
prove
even more costly for shareholders.
"Capital raising becomes harder," the analysts wrote. "Only four out
of 42
deals we track are in-the-money so far. This will make the next
round of
deals harder and more expensive."
Through Monday, the KBW bank and regional bank indexes were down a
respective 23.7 percent and 21 percent this year. The Standard &
Poor's 500
index (.SPX) was down 7.4 percent.
(Editing by Andre Grenon, Phil Berlowitz)
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