The Treasury Department's plan to spend as much as $700 billion to buy and hold banks' troubled assets, along with a ban on short-selling of financial stocks, helped calm markets at the end of last week.
Investors beat up bank stocks Monday, but analysts said they expect a short period of calm this week, when more banking companies are likely to go to the markets to raise capital.
"Given relatively low tangible equity levels, rising credit losses and continued industry deleveraging … banks and thrifts should take advantage of recent stock strength to raise capital," Paul Miller, an analyst at Friedman, Billings, Ramsey Group Inc., wrote in a research note Monday. Many bank executives have focused on regulatory capital, "but tangible common equity is paramount to investors in common equity," Mr. Miller wrote. "It dictates tangible book value, the degree of leverage to common shareholders, and, ultimately, stock price."
Terry McEvoy, an analyst at Oppenheimer & Co., said Monday that because of the short-selling moratorium, banking stocks likely will not face the immediate pressure they had to endure at other points this year after announcing plans to raise capital. "I expect more regional banks will take this opportunity to raise new capital," he said.
