Wells Fargo, Morgan Stanley raise $16.6 billion in day one

09 May 2009

To comply with the US regulators directive to infuse additional equity following the stress test for banks, Wells Fargo, the biggest US mortgage originator and the fourth-largest US bank by assets, says raised $8.6 billion through sale of 392 million shares of common stock, and Morgan Stanley raised $8 billion by selling shares and debt.

Following a three-month stress test, US regulators on Thursday directed the nation's 10 largest banks to raise a combined $74.6 billion to shore up their capital. The banks have six months to fill their capital shortfalls. (See: US banks told to raise $75 billion in capital by November).

If they can't raise the money on their own, the government said it is prepared to infuse more taxpayers' money to bail them out.

Howard Atkins chief financial officer of Wells Fargo said, its common stock offering was heavily oversubscribed, reflecting confidence on the part of both institutional and retail investors in Wells Fargo's business model and financial strength.

Wells Fargo has now to raise additional $5.1 billion, the government said. The San Francisco- based lender is estimated to face losses for 2009 and 2010 of $86.1 billion. Its shares have declined 16 per cent this year amid mounting home-loan losses.

Wells Fargo is The largest bank on the US West Coast and the second largst US mortgae originator and sevicer. In October 2008, it grabbed Wachovia in a friendly $15.1-billion deal, edging out Citibank that had anounced four days earlier that it would buy some businesses of the North Carolina-based Wachovia in a government-backed rescue (See: Wells Fargo edges Citi to grab Wachovia for $15.1 billion)