US banks may need to raise $65 billion of additional capital to cope with mounting losses from a global credit crisis that will not peak until 2009, Goldman Sachs analysts said on Tuesday.
The new capital would be on top of $120 billion already raised by the industry, analysts led by Richard Ramsden said. Among banks to have raised capital in 2008 are Citigroup, Wachovia, Washington Mutual and National City. Each raised at least $7 billion, and has struggled with losses tied most closely to mortgages. Goldman said it lowered its price targets for 14 banking companies and cut its 2008 earnings-per-share forecasts for 11.
According to the analysts, the nation’s weakened housing market has driven credit deterioration, and home prices will likely keep falling all year. Mounting write-downs and credit losses, and fears of more to come, have caused share prices of many banks to keep falling. This has caused paper losses for many investors who infused capital into the industry. Much of this capital has come from offerings of common stock or convertible preferred shares. “Capital raising becomes harder,” the analysts wrote. “Only four out of 42 deals we track are in-the-money so far. This will make the next round of deals harder and more expensive.”
Through Monday, the 24-member KBW Bank Index had fallen 23.7% this year, compared with a 7.4% drop in the Standard & Poor’s 500 index. Among the larger banks for which Goldman cut its price targets and earnings outlooks are BB&T, PNC Financial Services Group, SunTrust Banks, US Bancorp and Wells Fargo. Goldman also lowered its price targets for Wachovia and Washington Mutual, and its earnings outlook for Bank of America. (Reuters)