<TABLE border=0 cellSpacing=0 cellPadding=0 width=452><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published May 9, 2009
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>For US banks, the jostling for position is on
Nine stress-test banks that don't need capital may be able to grab market share and talent
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</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>JPMORGAN Chase & Co and Goldman Sachs Group Inc, banks that passed government stress tests without needing fresh capital, may win more backing from customers and shareholders as competitors such as Bank of America Corp and Citigroup Inc raise funds by giving up assets or equity.
Plugging the gaps may preoccupy management while lenders that don't need funds are freed to repay US bailout funds and escape curbs on lending and compensation, according to Samuel Hayes, professor emeritus of investment banking at Harvard Business School.
Ten of the 19 lenders tested must raise capital, led by Charlotte, North Carolina-based Bank of America, which needs US$33.9 billion, according to results released by the Federal Reserve on Thursday.
New York-based Citigroup, ranked second by assets after Bank of America, needs US$5.5 billion while San Francisco-based Wells Fargo & Co, ranked fourth, needs US$13.7 billion.
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</TD></TR><TR><TD bgColor=#fffff1><TABLE border=0 cellSpacing=0 cellPadding=0 width=124 align=center><TBODY><TR><TD vAlign=top>'... we hope banks are going to get back to the business of banking.'
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</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>The nine banks that don't need funds may be able to grab market share and talent until rivals are able to repay their share of funds borrowed from the US$700 billion US rescue fund.
'With the clarity that today's announcement will bring, we hope banks are going to get back to the business of banking,' Treasury Secretary Timothy Geithner said on Thursday.
'There are certain banks that are going to emerge as being the blue-chip standard against which other banks will be measured,' said Prof Hayes. 'Their cost of money will be lower. People are going to feel more comfortable about lodging money with them.'
Banks that raised money by selling preferred shares to the Treasury's Troubled Asset Relief Program (TARP) are subject to restrictions on executive pay and perks, which executives have blamed for the loss of key employees.
The US government also has said it may remove the executives and directors of any company that needs more taxpayer funds. Mr Geithner didn't rule out forcing management changes after the tests are completed.
New York-based American Express Co said on Thursday it planned to repay TARP funds and will start talking to regulators within days.
JPMorgan chief executive officer Jamie Dimon said on a conference call that he'd like to repay the US$25 billion it got from the government 'as soon as we can', reiterating comments he has made several times in April and May.
Goldman Sachs on April 14 raised US$5 billion selling shares to help repay its US$10 billion TARP investment, and CEO Lloyd Blankfein has said he wants to return the funds to run his bank without any limits on compensation.
The Treasury has said banks can raise money from new or existing shareholders, convert preferred shares sold to the government and private investors into common equity, or sell assets. Failing that, they can seek funds left over in TARP.
The stress test included hypothetical projections of how much banks would need under a 'more adverse scenario' in which the recession deepens more than expected, and the report listed potential losses by types of loans. Banks that passed the tests may still suffer loan losses.
Most of the potential losses at JPMorgan, Bank of America and Citigroup will likely come from credit card and home equity loans, the government said.
JPMorgan's losses through 2010 in both categories could reach US$41.3 billion, Bank of America's losses could be US$40.5 billion and Citigroup may see US$32.1 billion in losses on the loans.
Trading and counterparty losses at Morgan Stanley could be US$18.7 billion, while those at Goldman Sachs may reach US$17.4 billion. Losses on second-lien mortgages at Citigroup may rise to US$12.2 billion, or 19.5 per cent of the total. -- Bloomberg [/FONT]
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</TD></TR><TR><TD vAlign=top width=452 colSpan=2>For US banks, the jostling for position is on
Nine stress-test banks that don't need capital may be able to grab market share and talent
<TABLE class=storyLinks border=0 cellSpacing=4 cellPadding=1 width=136 align=right><TBODY><TR class=font10><TD width=20 align=right>
</TD><TD>Email this article</TD></TR><TR class=font10><TD width=20 align=right>
</TD><TD>Print article </TD></TR><TR class=font10><TD width=20 align=right>
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</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>JPMORGAN Chase & Co and Goldman Sachs Group Inc, banks that passed government stress tests without needing fresh capital, may win more backing from customers and shareholders as competitors such as Bank of America Corp and Citigroup Inc raise funds by giving up assets or equity. Plugging the gaps may preoccupy management while lenders that don't need funds are freed to repay US bailout funds and escape curbs on lending and compensation, according to Samuel Hayes, professor emeritus of investment banking at Harvard Business School.
Ten of the 19 lenders tested must raise capital, led by Charlotte, North Carolina-based Bank of America, which needs US$33.9 billion, according to results released by the Federal Reserve on Thursday.
New York-based Citigroup, ranked second by assets after Bank of America, needs US$5.5 billion while San Francisco-based Wells Fargo & Co, ranked fourth, needs US$13.7 billion.
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US Treasury Secretary Timothy Geithner
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'With the clarity that today's announcement will bring, we hope banks are going to get back to the business of banking,' Treasury Secretary Timothy Geithner said on Thursday.
'There are certain banks that are going to emerge as being the blue-chip standard against which other banks will be measured,' said Prof Hayes. 'Their cost of money will be lower. People are going to feel more comfortable about lodging money with them.'
Banks that raised money by selling preferred shares to the Treasury's Troubled Asset Relief Program (TARP) are subject to restrictions on executive pay and perks, which executives have blamed for the loss of key employees.
The US government also has said it may remove the executives and directors of any company that needs more taxpayer funds. Mr Geithner didn't rule out forcing management changes after the tests are completed.
New York-based American Express Co said on Thursday it planned to repay TARP funds and will start talking to regulators within days.
JPMorgan chief executive officer Jamie Dimon said on a conference call that he'd like to repay the US$25 billion it got from the government 'as soon as we can', reiterating comments he has made several times in April and May.
Goldman Sachs on April 14 raised US$5 billion selling shares to help repay its US$10 billion TARP investment, and CEO Lloyd Blankfein has said he wants to return the funds to run his bank without any limits on compensation.
The Treasury has said banks can raise money from new or existing shareholders, convert preferred shares sold to the government and private investors into common equity, or sell assets. Failing that, they can seek funds left over in TARP.
The stress test included hypothetical projections of how much banks would need under a 'more adverse scenario' in which the recession deepens more than expected, and the report listed potential losses by types of loans. Banks that passed the tests may still suffer loan losses.
Most of the potential losses at JPMorgan, Bank of America and Citigroup will likely come from credit card and home equity loans, the government said.
JPMorgan's losses through 2010 in both categories could reach US$41.3 billion, Bank of America's losses could be US$40.5 billion and Citigroup may see US$32.1 billion in losses on the loans.
Trading and counterparty losses at Morgan Stanley could be US$18.7 billion, while those at Goldman Sachs may reach US$17.4 billion. Losses on second-lien mortgages at Citigroup may rise to US$12.2 billion, or 19.5 per cent of the total. -- Bloomberg [/FONT]
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