UPDATE 2-KBW ups BB&T, positive on U.S. banks' capital raise

miércoles 3 de junio de 2009 16:14 CEST

(Adds Bernstein comments, details, background)

June 3 (Reuters) - Keefe, Bruyette & Woods upgraded BB&T Corp (BBT.N: Cotización) to "market perform" from "underperform", and said a capital raise and dividend cut at the bank have reduced the risk of a drop in share price.

The brokerage also raised its price targets on Bank of America Corp (BAC.N: Cotización) and SunTrust Banks Inc (STI.N: Cotización), after the lenders raised billions of dollars in a bid to break free from Washington's grasp. [ID:nN02502975]

Many banks have complained about the increased government scrutiny and pay restrictions that accompany TARP funds. To free themselves from the restrictions, banks still need to repurchase or get rid of government warrants to buy their shares.

Although the new capital raise would increase the number of Bank of America shares outstanding by about 2 billion, significant normalized earnings are still available for the company, KBW said in a note to clients.

Rochdale Securities analyst Richard Bove, however, said it is very unlikely at this point that Bank of America would ask to redeem its TARP preferred, as the capital raises have not been completed.

"This (capital raise) will lower results this year but increase results, I believe in 2011 when reserve builds will drop off meaningfully," Bove said in a note on Tuesday.

Separately, KBW analyst Robert Lee said although the elimination of preferred dividend at Morgan Stanley (MS.N: Cotización) would add to earnings, this was largely offset by a higher share count and the impact of a recently completed wealth management joint venture.