Financial Winners and Losers: Regions
Updated from 12:55 p.m. EDT
Financial stocks ended mostly to the down side Thursday, after Goldman Sachs analysts expressed optimism for big banks and caution on regionals, and former
Federal Reserve
Chairman Alan Greenspan offered a sour outlook for the sector.
The
Goldman report upgraded large banks to neutral after recent capital raising and the prospect for gains in the mortgage and capital markets, but expressed concern for regional banks' exposure to commercial and real estate loans. The
NYSE Financial Sector Index
fell 25.27 to 3,798.78.
The biggest loser for the day was
Regions Financial
(RF) - Get Report
, which slid 16.1% to $4.10 on heavy volume. Regions priced 400 million shares of common stock at $4 per share, as it works towards raising the capital that regulators insisted upon after the recent stress tests. The bank is heavily exposed to the Florida region, which has struggled during the recession.
Fifth Third Bancorp
(FITB) - Get Report
dropped 9.9% to $6.95 after announcing a stock offer and debt exchange program following the previous day's market close. Regulators had told the Ohio-based bank that it needed an additional $1.1 billion in capital after submitting to the stress test evaluation. Fifth Third said it was raising $750 million in new common stock and converting $1.1 billion in preferred shares into cash and common.
The Financial Times
said that
(BAC) - Get Report
is aiming to repay $45 billion it received in bailout money from the Troubled Asset Relief Program, or TARP. The report said the bank is on track to raise more than $35 billion in capital by the end of September. However, the bank told
TheStreet.com
that it was
not setting any timetable to pay back TARP
.
The government's stress tests showed earlier this month that BofA would need a capital buffer of $33.9 billion, more than any other bank, to protect against losses if the economy worsened. Earlier this week, BofA said it had raised $13.47 billion by issuing common stock, and together with the sale of its stake in
China Construction Bank
for about $7.3 billion, is more than halfway to reaching its capital raising goal.
Financial stocks were also reacting unfavorably to comments from former Fed Chairman Alan Greenspan, who said late Wednesday that U.S. banks still need to raise large amounts of money and that the financial crisis has yet to end.
"There is still a very large unfunded capital requirement in the commercial banking system in the United States and that's got to be funded," Greenspan said in an interview, according to a
Bloomberg
report. He added that "until the price of homes flattens out we still have a very serious potential mortgage crisis."
Greenspan's comments are a sharp contrast to remarks from Treasury Timothy Geithner. During testimony before the Senate Banking Committee on Wednesday, Geithner said that banks have raised more than $56 billion through new stock or debt issuance since the government's stress tests found that 10 firms would need a combined $75 billion in capital as a buffer.
During an appearance Thursday before the House Financial Services Committee, Geithner repeated his view that the financial system is stabilizing, although there is still work to be done in terms of oversight, regulation and transparency.
BofA shares gave back 8 cents to trade at $11.41. Among other U.S. bank stocks,
JPMorgan Chase
(JPM) - Get Report
gained 35 cents to sell at $34.90, while
Citigroup
(C) - Get Report
was up three cents to $3.72 and
Wells Fargo
(WFC) - Get Report
added 58 cents to bring it to $25.04.
U.K. banks were also under pressure after
downgraded the country's sovereign debt rating to negative from stable.
The Financial Times
said S&P's revision is embarrassing for the British Treasury and will give ammunition to the opposition Conservative party, which argues that the government is presiding over a growing and unstable amount of debt.
Among U.K. bank stocks,
HSBC Holdings
(HBC)
fell 2.3% to $42.64,
Royal Bank of Scotland
(RBS) - Get Report
slid 2.4% to $12.82 and
Barclays
(BCS) - Get Report
went back and forth all day but squeaked out with a gain of six cents to $17.80.
Elsewhere,
Franklin Templeton Investments
has emerged as the leading bidder for
American International Group's
(AIG) - Get Report
asset-management business, according to
The Wall Street Journal
. The AIG Investments unit is expected fetch $500 million, well below the $800 million some suitors proposed paying just two months ago, according to the report. AIG shares were down 1.1% to $1.80.
Separately,
The Wall Street Journal
reported that the Treasury Department would lend an additional $7 billion to GMAC, the financial arm of
General Motors
(GM) - Get Report
. GMAC failed the bank stress test even after already getting $5 billion from the Troubled Asset Relief Program. The Treasury wants the company to raise another $11.5 billion within six months. GM shares jumped 32.4% to $1.92.
