BofA within sight of $34bn capital target - Morgan Stanley to sell $2.2bn in common equity

BofA within sight of $34bn capital target - Morgan Stanley to sell $2.2bn in common equity
By Greg Farrell and Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: June 2 2009 13:20 | Last updated: June 2 2009 15:36
http://www.ft.com/cms/s/0/b8b8ea42-4f6e-11de-a692-00144feabdc0.html


Bank of America said on Tuesday it had raised $33bn since early May, putting it within striking distance of the government’s mandate that it raise $33.9bn as a result of a regulatory ”stress test” conducted earlier this year.

The capital raised includes $13.5bn from the sale of common stock; $4bn after-tax from the sale of a stake in the China Construction Bank; a $2.1bn benefit from a deferred tax asset; $1.3bn in reduced dividends on preferred shares over the next two years; and approximately $2bn from other dispositions. BofA is also converting approximately $9.5bn of preferred stock from non-government holders into common shares.

”We are pleased to have nearly reached our goal this quickly”, said Joe Price, BofA’s chief financial officer, in a statement.

Morgan Stanley meanwhile plans to sell $2.2bn in common equity to satisfy conditions for repaying funds it received under the US government’s troubled asset relief programme (Tarp).

The bank, which received $10bn in Tarp funds, said on Tuesday that it had not yet received approval to repay the government money but that it hoped to do so by the end of June. Morgan Stanley said China Investment Corporation and Mitsubishi UFJ Financial Group were expected to buy greater stakes in the company through the offering.

Morgan Stanley’s move comes a day after JPMorgan, which took $25bn in Tarp funds, said it hoped to sell $5bn in equity in an offer that could be priced as early as Tuesday, and American Express said it planned to sell $500m in common stock to repay $3.4bn of bail-out funds.

Last month, in the wake of a government stress test that showed Morgan Stanley with a $1.8bn capital shortfall, the bank announced plans to raise $2bn in equity and $3bn in non-government-backed debt. That was especially notable because the government set the issuance of non-Federal Deposit Insurance Corporation-backed debt as a condition for financial groups that want to repay Tarp funds.