29 Apr 2009

Banks may have to raise more capital: US report

12:03 pm on 29 April 2009

It's being reported that Bank of America and Citigroup may have to raise more capital.

The Wall Street Journal says a "stress test" conducted by the US government on 19 US banks found both banks would need more funds to cover future losses if the economic downturn worsens.

The "stress tests" are an attempt to identify which banks are well positioned to ride out the slump and which are overburdened by toxic assets and bad debts.

Both banks are reported to be disputing the preliminary findings.

Final results of the stress tests are due to be published next week.

Shares in Bank of America fell as much as 10% and Citigroup by 7% on Tuesday.

Both banks posted better-than-expected first-quarter results due to high trading earnings and one-off gains, but analysts wonder whether the improvement will last given looming credit losses.