Later today, results of the government conducted stress tests on the nation’s 19 largest are likely to reveal that some of these banks will need about $65 billion in additional capital, maybe more. Banks who need to raise money to cover potential losses in the coming two years are as follows: Bank of America Bank needs $34b, Citigroup needs $5b, Wells Fargo needs $15b, GMAC needs $11.5b, Morgan Stanley needs $1.5b.
Others are believed to need more as well. Here’s the list of banks who aren’t likely to need capital: JP Morgan Chase, Goldman Sachs, MetLife, American Express, Bank of New York Mellon, and Capital One.
Government regulators want banks to maintain tangible common equity equal to 4 percent of their risk weighted assets over the next two years. Tangible common equity is one of the most conservative measures of capital.
Treasury Secretary Tim Geithner said that the results will be reassuring. There are $110b left in TARP funds but the “reassuring” message is based on a theory that banks won’t have to tap this. Instead they can raise private money and/or use the government’s PPIP program to sell assets and raise money.
Here’s a WSJ interactive stress test chart that provides a quick view of where all tested banks fall in a number of categories: new capital needed, tangible common equity ratio, tier 1 ratio, TARP funds received, market cap, and Q1 loan loss provisions.