HSBC: Banks have a pulse
As the results of the government's bank "stress test" approach, a number of the financial firms are concerned about how they will raise money if they are told that they need more capital. HSBC (HBC), one of the world's largest banks, gave banks some hope. It brought in over $18 billion as the bank's own investors took advantage of its rights offering.
The success could be based on several things. One is that HSBC has a stronger balance sheet than many other large international banks. More important, investors and analysts may believe that the worst is behind most banks. In the U.S., with some banks talking about repaying TARP funds and a program in place to buy their toxic assets, there is a chance that better earnings may return. A change in mark-to-market accounting rules may push up those results even further.
According to Reuters, "The markedly improved global investor sentiment post-G20 and the slew of strong U.S. data in recent days have helped HSBC to a great extent," said Alex Tang, research director at Core Pacific-Yamaichi International.
The next test of the optimism about bank stocks is if a large U.S. firm like Bank of America (BAC) has to raise money. Its balance sheet and management are not the envy of the industry. If it can raise private capital, the worst days of the banking industry may actually be over.
Douglas A. McIntyre is an editor at 24/7 Wall St.