BofA, other U.S. banks scramble for capital

(Reuters) - Several large U.S. banks undertook big capital-raising efforts on Tuesday, hoping to satisfy regulators who want bigger cushions against a deep recession, or proof that they have enough of a buffer already.

Bank of America Corp, which regulators last week ordered to find $33.9 billion of capital, sold $7.3 billion of China Construction Bank Corp (CCB) shares to a group of investors, according to a person directly involved in the sale who was not authorized to discuss it. The bank declined to comment. CCB could not be reached.

Meanwhile, U.S. Bancorp and Bank of New York Mellon Corp sold a respective $2.5 billion and $1.2 billion of common stock, as they look to repay taxpayer bailout funds.

Unlike Bank of America, both were deemed in U.S. government "stress tests" to have sufficient capital buffers. BB&T Corp, which also got a clean bill of health, is expected to sell $1.5 billion of stock.

Dozens of lenders are hoping to convince regulators that they can withstand a steep economic downturn, or are healthy enough to repay money from the $700 billion Troubled Asset Relief Program.

TARP was designed to spur lending, but banks now consider it a burden because it imposes too many restrictions, including some on pay, and suggests that recipients are weak.

Bank of America took $45 billion from TARP, U.S. Bancorp $6.6 billion, BB&T $3.1 billion and Bank of New York Mellon $3 billion. Lenders say it is up to regulators to decide when money can be repaid. The government does not want banks to repay funds, only to find later that they need more.

"It is now a negative to have TARP," Bank of New York Mellon Chief Executive Robert Kelly said at a UBS financial services conference. "When I was traveling in the Middle East, Asia and in Europe over the past couple of months ... I got a pretty clear message (from clients) that it would differentiate us if we were able to get out."

Ten of the 19 large banks that underwent stress tests were ordered last week to raise $74.6 billion of capital to ward off a potentially severe downturn. Many banks said they do not expect conditions to sour as much.

Federal Deposit Insurance Corp Chairman Sheila Bair said on Tuesday the release of stress test results was a catalyst for capital raising by banks. She added that while the banking industry is gaining a better footing, "there's still some more pain to go.

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