raising capital

How will Lehman raise capital?

Jim Kim — Wed, 13 Aug 2008 17:51:42 -0400

KBW analysts, after meeting with the Lehman Brothers COO, are telling clients that Lehman is not likely to sell its Neuberger Berman asset management unit. The unit is just too integral to its operations and too valuable from a credit ratings agency stand point. So it looks like all that talk that Neuberger Berman--or even the entire wealth management operation--was on the block is not really true. This raises another issue: How will Lehman raise capital? We're operating under the assumption that it will need to--and many analysts would agree--but that may not necessarily be the case. If it is, however, what are its options? Slashing the dividend would not generate much. Issuing more stock might be tricky, risking the ire of current shareholders. KBW says that a sale of a stake to a private equity firm is a possibility. We'll have to see.

For more:
- here's the MarketWatch article

Capital raising to get harder for commercial banks

Thu, 22 May 2008 06:59:54 -0400

We all get the sense that banks are due for some more capital raising. But it comes down, in large part, to upcoming writedowns. If they are much worse than expected, banks will have to hit the capital trough again, notes Investors' Business Daily. The problem is, raising capital will only get harder, especially if we assume the SWF and private equity money has dried up. Many have already pushed to the limit of preferred sales. At some point, common shareholders will be forced to protest the terms and dilutive effects. Common share offerings will be iffy propositions at best. The article makes an interesting point. Commercial banks may have the harder time if other asset classes--auto loans for example--hit some turbulence.

For more:
- here's the article

Banks binge on preferred shares

Wed, 30 Apr 2008 06:59:55 -0400

Financial services firms have raised $54.7 billion this year, compared with $25.3 billion at the comparable point last year (Dealogic). Bank of America has raised the most, $10 billion. Citigroup is not far behind, according to Financial News Online. All of this is not exactly good news. On the one hand, it's a good sign that banks are successfully raising capital. Of course, the yields the banks have had to offer have been rather hefty. And the fears of dilution are real. Same goes for credit ratings. One analyst says that Merrill Lynch may be downgraded in the wake of a $2.5 billion offering.

For more:
- here's the Financial News Online article

SPOTLIGHT: RBS CEO

Thu, 24 Apr 2008 06:59:52 -0400

Fortune notes that Fred Goodwin, CEO of Royal Bank of Scotland, is known as Fred the Shred because of his penchant for keeping costs low. Shareholders have other epithets after the bank was forced into a $24 billion capital raising effort. Article

How low can Citigroup's dividend go?

Tue, 22 Apr 2008 06:59:55 -0400

Oppenheimer analyst Meredith Whitney is making a career in some ways off of Citigroup. She was among the first and the boldest to predict that Citigroup would have to slash its dividend and take other capital raising steps. She was right, of course, and earned a bit of fame. This year, Citigroup has cut its quarterly dividend from 54 cents to 32 cents, the AP notes. Now, Whitney says that Citigroup may have to cut the dividend even more, or eliminate it all together. Certainly, the bank's earnings are under pressure; it likely will lose money this year. The wild card is its other capital raising efforts. We presume some are underway. Which would be worse: another round of external capital raising or the elimination of the dividends? A tough spot for common shareholders.

For more:
- here's the AP article

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