Stress tests say Citi, BoA may need capital

LONDON: Citigroup Inc and Bank of America Corp fell in New York trading on concern the companies may be forced by regulators to raise additional capital.

Bank of America declined 13%to $7.80 and Citigroup dropped 8.5%to $2.81 after the Wall Street Journal said early results of the government���s so-called stress tests show the banks may need more capital. Company executives are meeting with regulators to dispute the findings, the Journal said, citing unidentified people with knowledge of the matter.

Bank of America, the biggest US bank by assets, and Citigroup, the third-largest, have already received about a combined $90 billion in US bailout funds after record losses from the collapse of the housing market.

Bank of America Chief Executive Officer Kenneth D Lewis is under growing pressure, with shareholders scheduled to vote tomorrow on whether to replace him. Citigroup CEO Vikram S Pandit���s job also may be at risk if the New York-based firm has to seek more funds.

The possibility that some banks may fail the stress test is creating ���a lot of anxiety in the market, and confidence is so important for the sector,��� said Philippe Gijsels, a senior equity strategist at Fortis Global Markets in Brussels, in a Bloomberg Television interview.

Richard Tesvich, a spokesman for Citigroup in Hong Kong, declined to comment, as did Bank of America spokeswoman Elizabeth Wood in London. Bank of America is based in Charlotte, North Carolina.

Results of the stress tests are scheduled to be made public as soon as May 4. The examinations were conducted by regulators to determine which of the 19 largest US banks require more capital to help weather adverse economic conditions. Analysts at Morgan Stanley have said SunTrust Banks Inc, KeyCorp and Regions Financial Corp are ���most likely��� to need funds.

Sheila Bair, chairman of the Federal Deposit Insurance Corp, said in an interview on Monday that the examination is not meant to be a ���solvency test.���

���It will instill confidence, not the other way around,��� Bair said after speaking at a Financial Women���s Association dinner in New York.

Citigroup���s board survived a shareholder vote at last week���s annual meeting, even after the company���s stock plummeted 89% in the past year.