U.S. banks in need of fresh capital for 2009

The Oppenheimer analyst Meredith Whitney speaks about the further stresses on the companies’ capital in 2009 as a result of a sharp increase in credit-rating downgrades on mortgage-related securities. She notes that U.S. banks will have to raise fresh capital in 2009. Whitney pointed that from July 2007 to date, over $5 trillion worth of securities have been downgraded with the pace of downgrades rapidly increased through 2008.

In October 2008 the U.S. Treasury established $700 billion Troubled Asset Relief Program (TARP) mainly to recapitalize banks and take bad assets off their books to help support creaking credit markets. Along with over $40 billion in fourth-quarter write-downs and loss provisions Whitney also expects "capital strains to become apparent from ratings change pressures."

JPMorgan Chase will have the largest increase in fourth-quarter 2008 loss provisions at $6.2 billion, compared with $2.5 billion in the year-earlier period. Bank of America Corp's fourth-quarter loss provision will be $6.7 billion, compared with $3.3 billion a year earlier. Citigroup Inc's provision for the period will be $7.9 billion, while Wells Fargo & Co's will be $4.4 billion, the analyst said.

Source: Reuters