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According to the FT, Citi needs $10 billion more, while B of A needs “well in excess of $10 billion.” The banks are furiously arguing their case, claiming the stress test results were too pessimistic. PNC and Wells are also mentioned as regional lenders that would be required to raise capital, unless they manage to convince the Feds otherwise.
In the event that the government prevails, Citi is rooting around for more securities it has issued that can be converted into equity. The good news, for Citigroup at least but not so much for investors that were hoping to continue to collect interest on their trust preferreds, is that Citi has around $15 billion in trust preferred securities lying around that it can convert. No word yet on how B of A plans to fill its hole.
Stress test results have been delayed and will be released on Thursday, May 7th giving the market plenty of time to continue rallying for no good reason. Somebody wake me up if anything interesting happens before then.
Posted May 4th, 2009 by Armen Hareyan
