There was very good news out yesterday from the financial sector on efforts to raise money via share sales. One major financial institution was successful and one regional institution announced their intentions. This comes on the heels of successful capital raises $8.6 billion from Wells Fargo and $4 billion from Morgan Stanley .
The big Kahuna of TARP, Bank of America Corp , raised $13.47 billion through a 1.25 billion share sale with an average price of $10.77. Coupled with the $7.3 billion from the sale of its stake in China Construction Bank Corp, BofA is about halfway home towards raising the $34 billion that the "Stress Test" results say they need. However, BofA has received $45 billion in funds from TARP and will not likely be able to pay that amount back any time soon. As the bank says, they want to do it by 2012.
Regions Financial Corp. will offer $1 billion in common shares and $250 million in new convertible preferred shares, a total of about half of what the Southeast regional bank was told it needs to raise by the government according to the WSJ. Regions received $3.5 billion in TARP funds, but these share sales are part of the $2.5 billion needed to meet the "Stress Tests" capital requirements.
The fact that financial institutions are finding willing buyers for their offerings is a very good sign that investors believe these institutions will survive and thrive. But the TARP funds are a major problem for financial institutions. The problem is they want to send it back to the government, but the government has other ideas.