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One might think that with toxic assets on their books still bleeding red ink and the credit crisis crimping M&A fees, and the possibility second-quarter earnings at U.S. and European banks may be way down, banks would have a hard time raising capital to bail themselves out of their mess. However, common wisdom sometimes is wrong.
According to the Financial Times: banks and other financial groups raised $89 billion in equity via 92 deals in the second quarter, the highest number of deals on record and the highest dollar volume for a year. US groups' second-quarter equity issuance of $259 billion was more than three times the $71.3 billion raised in the first quarter, according to data from Dealogic. The flurry of activity was keyed by the Federal Reserve's stress tests and equity offerings used to repay Troubled Asset Relief Program money. A prime example of how lucrative the investment banking business has been in the second-quarter is Goldman Sachs Group Inc. (NYSE:GS), which is in line to pay out its largest bonus pool in the firm's 140-year history. Still with earnings season right around the corner, it remains to be seen whether or not these offerings will be enough to offset mounting losses from write-downs, particularly in the commercial real estate sector, which has seen things worsen at a faster pace in the second quarter. And beyond that, the pain from deleveraging is expected to continue well into next year. Earlier this month Moody's Investors Service predicted another "$470 billion in [pretax] of loan and security losses and write-downs in 2009 and 2010" for the banking sector. - George White See FT story (subscription required) See Dealscape post on Goldman bonuses See Dealscape post on Moody's/bank losses See Dealscape post on commercial real estate's looming disaster
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