Log In | Register
CLEVELAND — Results of the federal government's "stress tests" of the nation's largest regional banks show Cleveland-based KeyCorp needs to raise $1.8 billion in new capital to withstand losses if the recession gets worse.
Cleveland-based KeyCorp said Thursday it wants to raise capital from private sources over the next six months. KeyCorp currently has $2.5 billion of capital from the U.S. Treasury's bailout program.
The bank could convert some of its federal funding to shares needed to satisfy the capital requirement.
The government's long-awaited "stress-test" results have found that 10 of the nation's 19 largest banks need a total of about $75 billion in new capital to withstand potential losses.
Henry Meyer, KeyCorp chairman and CEO, said the company's capital base remains strong, but it needs to be stronger to meet higher government standards.
"This is a hypothetical, almost extremely worst-case scenario," Meyer said. "It does not follow where the chairman of the Fed or the president of the United States think the economy is going."
He said KeyCorp is able to meet the capital need. Meyer said the government has vowed to support the financial companies evaluated and not let any fail, although it urged finding ways to raise capital privately.
KeyCorp said April 21 it lost $488 million in the first quarter of 2009, partly due to a large increase in its set-asides for loan losses, and said it would cut its dividend on common shares to 1 cent, allowing it to hold on to $100 million of capital a year.
KeyCorp raised capital twice in 2008, $1.74 billion from institutional and individual investors last June, and $2.5 billion in November, as a participant in the U.S. Treasury's rescue program. In the first quarter, KeyCorp made a $32 million dividend payment to the Treasury as its first quarterly payment under the government's capital program.
The "stress test" result was released Thursday after the stock market close. KeyCorp shares Thursday were down 91 cents, or 11.8 percent, to $6.78. In after-hours trading once the test result was known, KeyCorp shares rose 52 cents, or 7.7 percent, to $7.30.
___
On the Net:
