STRESS TEST: Smaller Banks May Feel Pressure After Results
07 Mayo 2009 - 9:44AM
Noticias Dow Jones
After the results of the Treasury Department's stress test of
the U.S.'s largest banks are released Thursday evening, the market
will begin to guess what the results mean for the smaller banks
that weren't tested.
Seven of 19 largest banks will need to raise at last $65 billion
more capital, according to reporting by The Wall Street Journal.
Several analysts think capital raising at the big banks means the
smaller ones will need to raise more capital as well.
"As these banks undergo their normal regulatory exams, the
metrics used in the stress tests of the top 19 banks will likely be
used," analysts at RBC Capital wrote in a research note.
Shares in the KBW Bank Index rose 5.9% in Thursday morning
trading, with shares of most of the 19 banks in the stress test up,
including Bank of America Corp. (BAC), which was up 14.6% to $14.54
in recent trading; Capital One Financial Corp. (COF) up 18.6% to
$26.50; and Fifth Third Bancorp (FITB), up 22.4% to $6.46.
The RBC Capital analysts extrapolated their assumptions about
the government stress tests to the top 100 banks, and identified
dozens of those that it believes will have to raise capital over
the next 12 months in order to meet the standard set by the stress
tests.
The government said in a statement Wednesday night that it had
no intention of expanding the stress test beyond the 19 largest
banks. It also said that "smaller financial institutions generally
maintain capital levels, especially common equity, well above
regulatory capital standards."
Fox-Pitt analyst David Trone said he was "very surprised" by the
regulators' stance on the smaller banks.
"This suggests that the stress test was more for confidence,"
Trone said, "since some of the biggest problem banks reside in the
mid- and smaller-bank segment, although their names aren't
nationally known and therefore any failures won't create a panic
against the national banking system."
Rochdale Securities banking analyst Dick Bove said in a recent
note that the stress test could have a dire effect on smaller
banks.
"The application of the stress test to these companies could
conceivably drive at least 150 of them out of business quickly,"
Bove wrote. "The FDIC would then be forced to create a series of
new banks across the country. The new regional banks would be
composed of the failed institutions."
Bove said the failure of the smaller banks would then hurt the
overall economy by further contracting the supply of available
credit.
-By Ed Welsch, Dow Jones Newswires; 201-938-5244;
edward.welsch@dowjones.com