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Analyze This: Banks

Banks are desperate to get out from under the onerous restrictions imposed by the government. And they’re willing to move mountains to do it!

This week JPMorgan sold $5 billion of stock, Morgan Stanley $2.2 billion and American Express $500 million after the Federal Reserve imposed capital-raising requirements on large banks hoping to repay bailout funds.

Although new issues are dilutive, most analysts agree the move is a step in the right direction.

Widely followed analyst Dick Bove says the secondaries are likely to be viewed very positively. Robert W. Baird analyst David George says the move should have minimal impact on capital ratios.

"We believe the competitive positioning of banks will be enhanced given the emancipation of the TARP restrictions including salary limits and potential politicizing of lending practices," George says.

And the secondaries are coming at a fast and furious pace.

Bank of America said it has raised close to $33 billion, including $7 billion over six days, nearly all of the $33.9 billion that regulators demanded after a "stress test" of the bank's ability to handle a deep recession. The bank said it expects to "comfortably exceed" the $33.9 billion figure.

Of course note every analyst likes what they see. S&P analyst Matthew Albrecht is more skeptical. He tells Fast Money that although he's cautiously optimistic on the financials he also believes that all the capital raises may have saturated the market.

In other words Albrecht is concerned it could be tougher for regionals if they're still in need of capital.

Well, if trouble is looming it hasn't shown itself yet. Regional bank KeyCorp said it has raised $1.3 billion, including $1 billion from selling stock, to help plug a $1.8 billion shortfall, while SunTrust Banks late Monday sold $1.4 billion of stock to help fill a $2.2 billion hole.

Next week banks learn which will be permitted to repay bailout funds. We’ll be watching.



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