(Updates with Capital One pricing, details on TARP repayment,
share prices)
DOW JONES NEWSWIRES
A handful of financial companies announced plans to collectively
sell more than $7 billion in stock as they look to raise cash
during a period of investor interest, with some of the companies
using the proceeds to pay back funds from the government's Troubled
Asset Relief program.
U.S. Bancorp (USB), Capital One Financial Corp. (COF), KeyCorp
(KEY), Principal Financial Group Inc. (PFG) and BB&T Corp.
(BBT) announced offerings Monday morning while U.S. Bancorp said it
also may offer medium-term notes along with stock.
Many banks have said they will pay back TARP funding as quickly
as possible in order to avoid strict regulations on their activity
- particularly related to executive pay - imposed by the
government.
Banks that underwent the government's recent stress tests that
want to pay back TARP also need to prove that they can raise money
in the investment-grade corporate bond market without leaning on
the Federal Deposit Insurance Corp. for backing. Since FDIC started
the program to insure bank debt last year, the majority of issuance
from banks has been guaranteed by the agency. Such a guarantee
results in much cheaper finance costs.
Capital One's shares were recently down 11% at $27.88 in trading
just after the opening bell. U.S. Bancorp was off 6.2% to $19.26.
BB&T's was 5% lower at $25, Principal was down 8.7% to $21.62
and KeyCorp was 4.7% lower at $6.64. The stocks are down after the
surge most of the shares have seen the past several months,
including last week as the results of the government's stress tests
were unveiled.
Capital One priced its offering of 56 million shares at $27.75
each, an 11% discount to Friday's closing price. The company has
392.7 million shares outstanding.
Meanwhile, U.S. Bancorp plans to sell $2.5 billion. BB&T, in
addition to its $1.5 billion offering, announced a widely expected
dividend cut.
The three banks weren't among the banks the U.S. government said
last week needed to raise additional capital, but many banks that
got a clean bill of health from the government have been taking
advantage of increasing investor demand anyway. The three companies
plan to use the funds, if approved, to buy back preferred stock and
warrants sold to the Treasury Department as part of TARP.
KeyCorp, though, was told it needed to raise $1.8 billion. The
Ohio-based bank announced plans to sell at least $750 million in
stock. The company's market value is about $3.3 billion.
Meanwhile, life insurer and asset manager Principal announced it
will sell 42.3 million shares as it looked to take advantage of a
two-month surge in its share price. Not including the 15%
over-allotment of the offer's proposed size, Principal would boost
shares outstanding by 16%.
The life-insurance sector has been roiled by troubles in
investment portfolios and annuities, both heavily exposed to the
downbeat financial sector. But Principal should get some help from
TARP, because the Treasury decided earlier this year to include
life insurers among the financial companies eligible for such
aid.
The amount of stock actually sold for all the companies may be
more than they expected, as many other companies have been boosting
the size of their offerings recently due to strong demand for
shares.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com