KBW analysts see regional banks needing $15B

A team of analysts at Keefe, Bruyette & Woods estimated in a report Tuesday that numerous regional and community banks not included in the government's "stress test" analysis will need to raise capital to offset rising loan losses.

Using the government's loan loss expectations and extending them over the entire credit cycle, beginning in April 2008 and lasting through 2010, the analysts determined that 71 banks in their coverage area of 163 banks will need to raise funds totaling $15.2 billion.

The KBW team found that Columbus, Ohio-based Huntington Bancshares Inc. is in need of the most capital out of that group, about $1.82 billion. Zions Bancorp would need $1.3 billion; Marshall & Ilsley Corp. $1.2 billion; Colonial BancGroup Inc. $840 million; and M&T Bank Corp. $800 million.

Colonial BancGroup declined to comment on the report. Calls to the other banks were not immediately returned.

Since the results of the government's stress tests of the country's 19 largest banks were released last Thursday, analysts and investors have been worried other banks needing to raise capital. In the tests _ which were designed to determine which banks would need more capital if the economy worsened _ the Federal Reserve imagined that joblessness would hit 10.3 percent next year and house prices would fall more than 22 percent.

Ten banks, including Bank of America Corp. and Citigroup Inc., must raise a total of $75 billion to satisfy the findings of the tests.

A number of banks _ even those not required by the government to boost capital levels _ have turned to the capital markets to raise money. This has been an encouraging sign that companies can again turn to the public for funding rather than relying on the government, but the reality of extra shares coming into the market and diluting existing shareholders has put pressure on the stocks in recent days.

Financial shares were lower across the board Tuesday, with regional banks posting the biggest declines.

Huntington shares tumbled 54 cents, or 9.5 percent, to $5.17, while Zions lost $1.39, or 7.6 percent, to $17.03. M&T dropped $1.72, or 3.4 percent, to $49.56.

Regions Financial Corp., which the government found to need more capital, dropped 71 cents, or 12 percent, to $5.21, and Marshall & Ilsley fell 82 cents, or 8.1 percent, to $9.28.