Roughly one-third of banking executives either are planning to raise capital through secondary market channels in the coming year or have already raised capital, according to a survey by US audit firm Grant Thornton LLP. Of 230 respondents to a survey conducted in May, 22% indicated their bank was “very likely” to go to market to raise capital within the next 12 months. Another 11% indicated their bank had already successfully gone to the market to raise capital. The survey results indicate that roughly one-third of banking executives see the market as supportive of capital-raising efforts. “While some banks have to raise more capital for regulatory reasons, others are doing so to take advantage of this unique market situation,” said John Ziegelbauer, national managing partner of Grant Thornton’s financial institutions practice, in a statement. “They may want to use the extra capital to expand their bank’s geographic footprint through [a Federal Deposit Insurance Corp.]-assisted transaction or possibly other acquisitions.” Although the remaining 67% of survey respondents indicated no likely plans to raise capital, none of the respondents reported having gone to the market in an unsuccessful attempt to raise capital: The majority of bankers are optimistic about the US economy in the near term, with 45% expecting conditions to improve over the next six months, according to a separate survey by the firm. Eleven percent now expect economic conditions go get worse, compared with 20% in the same survey six months earlier. “There is also a lot of uncertainty with regards to regulatory reform,” said Ziegelbauer, “and banks could be raising capital now to ensure that they have a sufficient amount under any new rules that are created as part of the Wall Street reform effort.” Both branches of Congress are currently reconciling financial regulatory reform bills that could include a framework for covered bonds and an exemption for certain mortgages from the 5% credit risk retention that aims to encourage mortgage originators and securitizers to keep an interest in the financial products they create. But the industry has warned these regulations could make the cost of doing business prohibitive. For a study of the new world of mortgage finance under the forthcoming regulatory landscape, subscribe here and catch the upcoming issue of HousingWire magazine. Write to Diana Golobay.
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