Updated from 5:42 p.m. EDT
The stress test results rolled in after the market's close on Thursday, confirming reports that the country's 19 biggest financial institutions will need to raise $75 billion as a buffer against loan losses through the remainder of the economic downturn.
Under what regulators characterized as a "deliberately stringent test," losses at the 19 firms from 2009 to 2010 could reach $600 billion, according to the Federal Reserve. Most of those losses would come from residential real estate and other consumer loans. Those losses would represent 9.1% of the banks' loan books, a higher loan-loss ratio than the historical peak of the 1930s depression.
"The assessment announced today will help strengthen the lending capacity of banks, with greater transparency and actions to reinforce the amount of capital banks hold against the risk of future losses," Treasury Secretary Tim Geithner said in a statement.Of the banks that were tested, Bank of America (BAC) required the biggest infusion, of $33.9 billion, followed by Wells Fargo (WFC) with $13.7 billion; General Motors' (GM) GMAC financing arm, with $11.5 billion; and Citigroup (C) with $5.5 billion. Regions Financial (RF) will need $2.5 billion in fresh funding, according to the test results, while SunTrust (STI) will need $2.2 billion; both Morgan Stanley (MS) and KeyCorp (KEY) will need $1.8 billion; Fifth Third (FITB) will need $1.1 billion; and PNC Financial (PNC) will need $600 million. Just before the test results were released, Wells Fargo announced a $6 billion common stock offering and Morgan Stanley followed up with an announcement that it will raise $5 billion in stock and debt. Citi announced that it would raise $5.5 billion by converting some of the government's existing preferred stake into common equity.
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