According to Reuters, a Goldman Sachs industry analyst team led by Richard Ramsdenhas issued a report suggesting that global financial institutions are short an additional $65 billion of capital. Banks have raised over $300 billion in capital to shore up their balance sheets during this credit crisis. Investors who have already lost $10 billion in previous capital raising in the U.S. are beginning to wake up to the fact that they are throwing good money after bad.
“Banks will not turn until a peak in credit costs is in sight,” the analysts wrote. “Moreover, weaker banks are unlikely to benefit from consolidation as bank deals always slow when credit is deteriorating and larger banks are hamstrung by their own problem assets as well as accounting requirements.”
Sounds like another mugging and robbery by the financial services sector. Stick ’em up.
If additional capital raising campaigns do commence after the Q2 and Q3 writedown season, it will be interesting to see what investor reaction shall be.
U.S. banks may need $65 bln new capital: Goldman, Reuters, 17 Jun 2008