$8.52B Needed by Five Regional Banks

Five of the largest regional banks in the country are now quite vulnerable when it comes to the recession and are in need of eight point two billion dollars’ worth of new capital. This was according to the results of the stress tests required by the government last Thursday.

Capital-Raising Mandates

Suntrust Banks Inc. and Regions Financial Corp. are the two biggest regional banks that are in the Southeast. They ended up betting bigger capital-raising mandates compared to the other three banks that were based in the Midwest. These other banks are Fifth Third Bancorp, PNC Financial Services Group Inc. and KeyCorp. Banks that do not need the come up with additional funds include Us Bancorp as well as BB&T Corp based in the Winston-Salem North Carolina area. These regional banks have the capacity to act like the bellwethers of their local economies’ health – by making loans to a lot of businesses as well as other industries in the same region to finance several development projects and to employ several thousand people as well. A lot of regional banks are concentrated in loans of commercial real estate, which is a hot spot for potential trouble. These would make them quite vulnerable to some weaknesses when it comes to their geographic areas. Should the recession continue to deepen, there could be defaults on some high risk loans which would inevitably soar. A lot of companies have already made the decision to shut down and pull out of shopping malls as well as office buildings which were then financed by such loans.

Other Test Results

The tests conducted by the government also resulted in other banks needing to raise income. These banks include Regions Financial Corp in Birmingham, Alabama (needs around two point five billion dollars), SunTrust in Atlanta (needs to raise around two point two billion dollars), KeyCorp bank in Cleveland (needs one point eight billion dollars) Cincinnati-based Fifth Third (with one point one billion dollars) and PNC bank in Pittsburgh (which needs six hundred million). Each of the banks had received their own injection of a couple billion dollars from the program for federal financial bailout and that some of them also think they will be able to pay it back soon.

Such banks also mentioned last Thursday that they plan to raise these funds through capital markets so they will no longer need government aid. In some cases, assets will also be sold. They are also required to turn in their plans for raising capital to regulators in two months time. A lot of analysts as well as investors have been very eager to find out just how these seven regional banks will fare based on the tests established by the government to uncover their financial conditions. These results might also spark an entire round of mergers, thanks to strong institutions absorbing weaker banks as soon as the tests indicate that more capital is needed.