Bank of America
said Tuesday that it has raised nearly $33 billion and expects to "comfortably exceed" the capital target set by federal regulators, though it may issue more common shares than previously outlined.
The company also said it has raised $5.5 billion in long-term debt without government guarantees. The decision is more costly, but shows signals of investor confidence that BofA will not default on its debt.
CFO Joe Price said the firm is "pleased to have nearly reached our goal this quickly," less than a month after the government's stress test results were announced.
BofA has raised nearly $33 billion of the $33.9 billion in fresh capital required by regulators as a buffer against severe economic conditions. It may issue nearly 300 million new common shares, including 200 million earlier announced as part of an exchange of preferred stock to common shares.
Such a move would dilute shareholders in a relatively minor way, since Bank of America now has more than 6 billion shares outstanding.
So far, BofA has agreed to exchange $9.5 billion worth of perpetual preferred stock into 704 million shares of common stock. The move raises Tier 1 common capital levels, and reduces dividend payments by at least $1.3 billion through 2010. The bank may issue an additional 296 million shares in a similar manner.
BofA has also sold $13.5 billion worth of common stock and raised $2 billion from other unspecified "dispositions." It will further add to common equity by its sale of China Construction Bank holdings, whose gain has been reported at about $7.3 billion, though not confirmed by the bank.
Because of its higher Tier 1 levels, Bank of America also expects to receive a $2.1 billion gain from deferred tax assets.
In terms of its debt issuance, BofA raised $3 billion in five-year notes on May 8 and $2.5 billion in 10-year notes on May 28 without Federal Deposit Insurance Corp. guarantees.