Thank you for sharing!

Your article was successfully shared with the contacts you provided.

SAN FRANCISCO-Wells Fargo & Co. said Thursday it will try to raise $6 billion through a common stock offering. J.P. Morgan Securities Inc. and Wachovia Securities are underwriting the offering for the locally headquartered bank. The announcement comes the same day the Treasury Department reported the results of its stress test for banks, which showed Wells Fargo, one of the nation’s largest banks, needs to scare up $13.7 billion despite receiving $25 billion in taxpayer funds last year.

The tests were aimed at gauging how much more capital any of the 19 largest US banks would need if the recession were to worsen. In all, 10 banks were said to need a combined $74.6 billion on top of the $157 billion in TARP funds they received.

The only bank determined to need more money than Wells Fargo is Bank of America Corp., which is said to need an additional $33.9 billion on top of $45 billion in TARP money. BofA on Thursday said it would sell 1.5 billion shares of common stock to help meet the capital requirement, and also will sell some businesses. The third largest total was GMAC LLC, which is said to need an additional $11.5 billion on top of $5 billion in TARP funds.

Wells Fargo shares closed at $24.76, down nearly 8% on heavy trading volume, and declined further in after-hours trading. On Wednesday, as part of a cost-cutting initiative, the company has issued layoff notices to 548 workers in Charlotte, NC, the former home of Wachovia Corp., which Wells Fargo acquired in late 2008 for $12.5 billion.

The company also said it is freezing its cash-balance pension plan for all employees. Previously, it cut its dividend by 85%. Unlike many other companies, however, the banks said it will continue to match employees’ 401(k) contributions of up to 6%.

Last week, Wells Fargo CEO John Stumpf said the bank will pay back $25 billion to the Treasury’s Troubled Asset Relief Program and restore its dividend as soon as possible. Last month, Wells Fargo reported a 53% year-over-year jump in its first quarter profit as record-low interest rates prompted more borrowers to refinance.

“We earn our way out,” Stumpf reportedly said at the San Francisco company’s annual shareholders’ meeting April 28. “This company has a great capacity to produce wonderful results. That will be the driving force.”

The other banks said to need additional capital are Citigroup Inc. ($5 billion), which received the most TARP money ($50 billion); Region’s Financial Corp. and Sun Trust Banks Inc.($2.2 billion each); KeyCorp ($1.8 billion); Morgan Stanley ($1.5 billion); Fifth Third Bancorp. ($1.1 billion), and; PNC Financial Services ($0.6 billion). Citigroup said Thursday it would convert preferred shares in order to meet the requirement.

Several others were determined not to need additional capital. Those deemed already prepared for a deeper recession include JP Morgan Chase, American Express Co., Goldman Sachs Group Inc., Bank of New York Mellon Corp., MetLife Inc., Capital One Financial Corp. and State Street Corp.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.