NEW YORK — The nation’s biggest financial institutions received their marching orders from the government Thursday, and their CEOs wasted no time mapping out the road ahead.
Ten of the nation’s biggest banks must raise a total of nearly $75 billion of capital to beef up common equity, protecting banks against a dramatic economic worst-case scenario. Some responded swiftly: Morgan Stanley, Citigroup Inc. and Wells Fargo & Co. already have unveiled plans to comply with the government’s capital demands.
“I am glad the results have been announced and that it is behind us,” said Citi chief executive Vikram Pandit. He said his bank will convert $5.5 billion of preferred shares into common stock, in addition to a previously announced conversion plan, to cushion its capital base.
Similarly, Wells Fargo will offer $6 billion in stock to boost its capital. The government asked it to raise $13.7 billion in capital. The San Francisco-based bank said it will raise the balance of the capital shortfall through other means.
Morgan Stanley intends to sell $2 billion in stock and another $3 billion in senior notes not guaranteed by the Federal Deposit Insurance Corp. The investment bank was asked to raise $1.8 billion.
“Never has a test been so aptly named,” said Bank of America Corp. CEO Kenneth Lewis, referring to what has been called the government’s stress test of banks’ financial health.
Officials at the Charlotte, N.C.-based bank said they will raise capital through asset sales, earnings in the upcoming quarters and from private investors. The bank believes those actions should allow it to avoid needing to convert into common stock some of its $45 billion in government loans under the Troubled Asset Relief Program.
The Associated Press contributed to this report.
