Result Leaks Show Capital Split Between Banks

In clearly polarized results, many major US banks either safely passed government-initiated stress tests or failed by billions of dollars, according to most recent reports filed by the Wall Street Journal. Reports began Wednesday that Bank of America (BAC) will need to raise $34bn in fresh capital. But that was just the beginning. Wells Fargo (WFC) needs from $13bn to $15bn, GMAC (GMAC) needs $11.5bn, Citigroup (C) needs $5bn and Morgan Stanley (MS) needs $1.5bn, sources told the WSJ. Meanwhile, regulators found JP Morgan Chase (JPM), Goldman Sachs (GS), MetLife (MET), American Express (AXP), Bank of New York Mellon (BK) and Capital One Financial (COF) in possession of sufficient capital to weather more severe economic conditions. Federal regulators plan to officially release stress test results today after market close, but that hasn’t stopped industry sources from discussing the strength of banks concerned. One of HousingWire‘s sources inside Bank of New York (BoNY) Mellon tells us major European banks have parked considerable reserves at its Canary Wharf operations in London. The source says large European banks are confident in leaving capital at BoNY Mellon, a stateside Troubled Asset Relief Program administrator and consequentially very likely to be “insured” with government capital, should any problems arise, without the public shame of asking for a capital infusion. But even the banks designated as sufficiently capitalized under the stress tests carry some government aid on their books. Chase received $25bn through TARP, Goldman Sachs received $10bn, Cap One received $3.56bn and Am Express received $3.39bn and  BoNY Mellon received $3bn. Most of those capital purchases occurred in the first month of TARP’s operation, when regulators repeatedly assured taxpayers that only healthy banks could participate. Plenty of the banks now facing capital needs also received TARP funds. Citigroup received $50bn including a loss guarantee, BofA received a total $45bn of TARP funds, while Wells Fargo received $25bn, Morgan Stanley received $10bn and GMAC received $5bn. Write to Diana Golobay. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.