Regulators Ask Bank of America to Raise $34 B

123jump.com Staff
06 May, 2009
New York City

The private sector shed less than 500,000 jobs in April. Bank of America is said to need $34 billion to meet its regulatory capital requirements and Citigroup may need $40 billion. Markets are expected to be volatile this afternoon in anticipation of stress-test results after the close.

[R]9:00AM New York – The private sector shed less than 500,000 jobs in April. Bank of America is said to need $34 billion to meet its regulatory capital requirements and Citigroup may need $40 billion.[/R]

The ADP Employer Services reported that private sector shed 491,000 jobs in April. The survey does include changes in employment in non-profit agencies and in government.

U.S. stocks futures edged higher after the release of monthly payroll data. However, the results of stress-tests will be the focus of traders.

Media reports suggest that Bank of America may need $34 billion in capital and Citigroup may need as much as $40 billion in capital.

While the banks are likely to seek capital from private sectors or sell assets, they may be forced to covert preferred stock holdings of the U.S. Treasury to common stocks.

Fed Chairman Bernanke in his prepared remarks to the Congressional Joint Economic Committee noted, “Following the announcement of the results, bank holding companies will be required to develop comprehensive capital plans for establishing the required buffers. They will then have six months to execute those plans, with the assurance that equity capital from the Treasury under the Capital Assistance Program will be available as needed.”

U.S. Treasury has been treating banks with lenient standards compared to automakers and have not asked banks to shrink and sell several assets that are not core to their operations.

Bank of America may be forced to sell its stake in China Construction Bank Corp and Citigroup may be asked to sell more assets in Japan and in Europe.

Earnings Review

Electronic Arts Inc, the video game publisher said fourth quarter revenues fell 24% to $860 million from $1.13 billion a year ago. Net loss in the quarter was $42 million or 13 cents per diluted share compared to net loss of $94 million or 30 cents per share a year ago.

Net revenues for the fiscal year 2008 rose 15% to $4.21 billion from $3.67 billion a year ago. Net loss in the year was $1.09 billion or $3.40 per diluted share compared to net loss of $454 million or $1.45 per share a year ago.

Centex Corporation, the homebuilder said fourth quarter revenues fell 64% to $823 million from $2.3 billion a year ago. Net loss in the quarter was $402.8 million or $3.24 per diluted share compared to net loss of $910.5 million or $7.36 per share a year ago.

Total revenues for the fiscal year 2008 fell 54% to $3.83 billion from $8.28 billion a year ago. Net loss in the year was $1.39 billion or $11.17 per diluted share compared to net loss of $2.66 billion or $21.68 per share a year ago.

Asian Markets Review

The Hang Seng index in Hong Kong increased 404.49 or 2.46% closed to 16,834.57, CSI 300 index in China higher 37.96 or 1.39% closed to 2,764.98.ASX 200 index in Australia decreased 23.30 or 0.60% closed to 3,867.10. The KL Composite index in Malaysia higher 15.09 or 1.50% closed to 1,023.96..

The Kospi Index in South Korea decreased 4.47 or 0.32% to close at 1,393.45. SET index in Thailand closed higher 16.88 or 3.33% to 523.14 and JSE Index in Indonesia increased 26.27 or 1.48% closed to 1,798.34. The Sensex index in India decreased 178.33 or 1.47% closed to 11,952.75.

Europe Markets Review

In London FTSE 100 Index traded higher 13.35 or 0.31% to 4,350.29, in Paris CAC 40 Index increased 21.77 or 0.68% to 3,246.77 and in Frankfurt DAX index traded higher 1.58 or 0.03% to 4,854.61. In Zurich trading SMI decreased 5.50 or 0.10% to 5,275.43.