BofA Capital-Raising Efforts Stoke Optimism

Bank of America (BAC) seems to be more than halfway through with its required capital raise, and is hatching a plan to ensure that it has another $13 billion in fresh funds by Nov. 9.

So far, nearly $21 billion of BofA's capital raising has been disclosed, though it's unclear how tax treatment will affect some of those funds. Still, at face value, the sum represents 61% of the $33.9 billion the government said Bank of America must raise to withstand the economic downturn if conditions continue to deteriorate.

But few in the banking world expect economic conditions to get quite as bad as the government's worst-case scenario outlined -- with unemployment surging higher and loan losses above Great Depression levels. If they're right, those loads of excess capital could be put to work quite profitably.

At a conference in London Wednesday morning, Bank of America CEO Ken Lewis called the stress test which determined that shortfall "the most aptly named test in history," adding that results showed banks are "strong, well-capitalized and prepared to face even a more dire economic scenario than any of us expect."

"Investors actually seemed relieved at both the results of the test and the fact that banks are beginning to fulfill their capital raising obligations in the private markets," Lewis said in prepared remarks.

To plug in the government-mandated gaps, BofA outlined a plan to raise $17 billion by issuing new stock and converting private preferred holdings to common; $10 billion through asset sales; and $7 billion in earnings.