May 6 (Reuters) - Banks undergoing U.S. government stress tests will need a total of $75 billion in capital, with Bank of America (BAC.N) and Wells Fargo (WFC.N) having the largest need, analyst Keith Horowitz of Citigroup said.
While Bank of America is likely to need a substantial increase in common stock, the brokerage said it believes the bank can cover it via conversion of preferred stock.
“The (Bank of America) stock looks the cheapest in the group,” the analyst said.
Citigroup also downgraded Fifth Third (FITB.O) to “hold” from “buy” and said the bank may need to raise upwards of $2 billion in capital, which is higher than the private preferred balance of $1.1 billion.
BB&T (BBT.N) may need capital but can address the need by cutting its dividend, Horowitz said.
The top 19 U.S. financial institutions have been negotiating with regulators on how much of an additional capital buffer the banks will need to sustain losses that might occur if economic conditions deteriorate further.
Results of the stress test, which will determine the ability of the 19 lenders to weather a deep recession, are due out on Thursday.
For a wrapup on the stress tests, double-click on [ID:nL6943131]
For a graphic, click on:
here (Reporting by Sweta Singh in Bangalore; Editing by Mike Miller)