Euro zone banks need $202 bn in capital, says JP Morgan

Euro zone banks need at least euro 150 billion ($202 billion) of capital provided through a Europe-wide Troubled Asset Relief Program (TARP) akin to the US plan, according to a report by JPMorgan Cazenove.

France could lead with a capital injection of about euro 15 billion to euro 20 billion for its banks, analysts at JPMorgan led by Kian Abouhossein said in a note to clients on Monday. Societe Generale SA would be one of the “key beneficiaries” if France led the European TARP program, they said. The minimum required to reopen European bank funding market is euro 112 billion, according to the note.

“We assume a Euro TARP rather than specific support only for the most distressed institutions, as we believe a general solution is required to restore general confidence and reopen the funding markets for all institutions,” Abouhossein said in the note.

TARP, a $700-billion program, was started in 2008 to inject capital into banks following the collapse of the US housing market and the bankruptcy of Lehman Brothers Holdings Inc.

JPMorgan estimates the capital requirement would be about euro 5.5 billion for Societe Generale and about euro 600 million for BNP Paribas SA.

“We assume that France would move first independently, given the recent pronounced pressure on its banks funding costs,” the JPMorgan analysts said. “Germany could potentially also act independently.”

Modelling a European financial rescue on TARP “would be a good solution,” Goldman Sachs Group Inc President Gary D Cohn said at a panel discussion with other bank executives yesterday.