Financial Winners and Losers: JPMorgan

Financial stocks were mostly lower early Tuesday, after several firms announced plans for common stock offerings intended to help repay bailout funds.
Publish date:

Updated from 1:34 p.m. EDT

Financial stocks were mostly lower Tuesday after several firms announced plans for common stock offerings intended to raise capital and demonstrate to the U.S. government they are able to repay bailout funds.

Late Monday, the

Federal Reserve

outlined the criteria it will use to evaluate applications to redeem Troubled Asset Relief Program, or TARP, capital. Among the criteria, the Fed said banks seeking to redeem TARP funds must demonstrate an ability to access the long-term debt markets without reliance on the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program, and must successfully demonstrate access to public equity markets.

Redemption approvals for an initial set of these large bank holding companies are expected to be announced during the week of June 8, the central bank said.

Morgan Stanley

(MS) - Get Report


American Express

(AXP) - Get Report


JPMorgan Chase

(JPM) - Get Report

each separately announced common stock offerings to satisfy the supervisory condition to enable it to redeem TARP preferred capital.

Morgan Stanley said it will raise $2.2 billion

after pricing 80.2 million shares at $27.44 each, an 8.2% discount to Monday's closing price. While approval for repayment has not been granted, Morgan Stanley said it believes that upon completion of the capital raise it will have satisfied the Fed's criteria for fully redeeming the TARP preferred capital and expects to redeem it before the end of June. Morgan received $10 billion in TARP funds.

Late Monday,

AmEx announced a public offering of $500 million

of its common stock, with the proceeds to be used in part to pay back government bailout funds. Shortly before the opening bell, AmEx said the public offering of 19.8 million shares of common stock priced at $25.25 a share.

Like Morgan, AmEx said the move is to satisfy the criteria that the company can access public equity markets. AmEx received $3.4 billion in bailout money.


JPMorgan said it expects to raise $5 billion

after it priced 142 million shares of common stock at $35.25 a share, a 2.4% discount to Monday's closing price. The capital raise comes in order to repay a $25 billion TARP investment made last year. Like the others, JPMorgan said it too was offering stock in order to satisfy the supervisory condition.

Matt O'Connor, senior analyst at Deutsche Bank, said JPMorgan's offering has important implications for other banks -- "most notably additional capital will need to be raised."

"Assuming each bank we cover wanted to repay all of TARP right now (which is unlikely), we find 7 of the 16 banks would need to raise a total of $50 billion of common," O'Connor wrote in a research note.

The secondary offerings were pressuring shares of two of the three firms. AmEx slumped 4.9% to $24.71, and JPMorgan fell 4.5% to $34.50. Morgan shares rebounded from a 5.6% loss earlier in the sesion, finishing up 0.7% at $30.09.


Bank of America

(BAC) - Get Report

said Tuesday it has raised almost $33 billion towards the $33.9 billion capital buffer identified by the government's stress tests. The bank now says it "will comfortably exceed that number." Shares finished higher by 1.8% at $11.41.

In other bank news,


(C) - Get Report

has told five former top executives

the bank won't pay them tens of millions of dollars

in promised severance payouts, according to

The Wall Street Journal

. The report said bank officials concluded they wanted to avoid even the possibility of a public backlash over the money. Citigroup shares gave back 4.9% to end at $3.51.



(BCS) - Get Report

shares dropped 10.7% to close at $18.31 after an

Abu Dhabi investor sold shares

of the bank. International Petroleum Investment Co., controlled by the royal family of Abu Dhabi, said it planned to sell 1.3 billion shares in Barclays, held by its subsidiary, PCP Gulf Invest 1 Ltd. The company invested 2 billion pounds in Barclays, but the shares currently are worth about 4 billion pounds.

Among analyst moves, Morgan Keegan upgraded

SunTrust Banks

(STI) - Get Report

to outperform from market perform. The firm said SunTrust's dilution concerns are now in the rear view mirror, and that current valuations provide an attractive entry point to investors "for what is a longer term attractive retail banking franchise that should benefit from a return to balance sheet banking at the other side of this cycle."

On Monday, SunTrust said it would accelerate its common stock offering, saying it will offer $1.4 billion in common shares and start a $1 billion buyback of preferred shares and hybrid securities. Proceeds from the transactions will be applied to the firm's Tier 1 capital, the regional bank said.

Morgan Keegan said the completion of Monday's announced capital raise is a significant positive for SunTrust shares as it should remove the uncertainty that had kept many investors on the sidelines. SunTrust shares jumped 15.5% to close Tuesday at $15.94.