Bank of America Corp and Citigroup will raise additional capital to the tune of $34 billion and $5-$10 respectively, said sources close to the development.
According to the results of a government stress -test, Bank of America Corp need $34 billion in additional capital. A possible shortfall is certain to increase pressure on CEO Kenneth Lewis, who was last week ousted by shareholders as Chairman of the biggest US bank.
It may also unnerve investors who had hoped the results of the stress-tests on Bank of America and 18 other banks might show the industry was in a less dire condition than had been feared.
Bank of America has been at the top of the list of those believed to need more capital, as it faces significant credit losses and a controversial takeover of Merrill Lynch & Co, which closed on January 1. The $34 billion figure more than triples previously published reports of Bank of America’s capital needs.
Citigroup Inc may have to raise $5-$10 billion in new capital to meet a US government requirement that it holds up to $55 billion in capital, the New York Times said.
Citigroup is expected to need to raise capital as insurance against any further downturn in the economy.
The New York bank can easily cover any shortfall and is considering several options to close that gap, the paper cited Citigroup executives as saying.
