Report: Results of Bank Stress Tests Show Citi, Bank of America Need More Capital
According to the Wall Street Journal, the results of bank stress tests have compelled regulators to inform Citigroup and Bank of America that they need to raise more capital. At Bank of America, the capital shortfall is in the billions.
As a result of the widely publicized report, shares of both stocks fell during morning trading activity. Bank of America shares fell 6% while shares of Citi fell 5%.
- Bank Stress Test Results Show Citi, Bank of America Need More Capital — (Wall Street Journal, subscription required – Click Here to Get The Wall Street Journal for 75% off)
The bank stress tests were conducted on 19 of the largest banks in America, with the goal being to determine a) which banks were in a position to deal with a future financial shock; and b) which banks were in need of further government support. Banks have been stress-tested based on estimates of a national unemployment rate at 8.8 percent as well as less optimistic estimates of 10.3 percent.
According to a report at CNNMoney.com, Citi and Bank of America are expected to object to the purported results of the bank stress tests with “detailed rebuttals.” Despite the reports today, the official results of the bank stress tests are not expected to be made public until May 4.
In addition to the reported capital failures at Bank of America and Citi, a report in New Mexico Business Weekly says that, according to the WSJ, many regional banks will also fare poorly in the bank stress test results. Regional banks expected to have capital shortfalls are those with large portfolios of commercial real estate loans.
Related resources:
Bank stress test results show Citi, BofA may need more capital — (MarketWatch)
Bank stress test results force shares of BofA and Citi down — (AP)
Results of bank stress tests force U.S. stock futures to decline — (Bloomberg)
Results of bank stress tests show Bank of America and Citi may need more capital — (Reuters)
Tags: bank of america, Citi, federal bailout
