May 10--Three of the largest banks operating in St. Louis flunked the government's stress test last week and will have to raise new capital. They include Bank of America, ranked No. 2 in St. Louis market share, along with fifth-ranked Regions Bank and sixth-ranked PNC Financial, the new owner of National City Bank.

What does that mean for St. Louis Probably not much, say bankers and bank analysts here.

That's because, one way or another, they'll all come up with the needed capital, analysts say. Investors are taking a new interest in bank stocks, which makes capital-raising much easier.

"The window for all financial institutions to raise capital, away from the government, is definitely open," said long-time bank analyst Joe Stieven of Stieven Capital Advisors. "There appears to be a lot of money sitting on the sidelines ready to go."

If the private market won't come up with the cash, there's always Uncle Sam. The government could fill much of the gap by converting much of its past investment in the banks from preferred shares into common equity.

All that makes it unlikely that the big banks will try to shrink their way into capital compliance by restricting lending, according to analysts. If they did, there are plenty of healthy St. Louis banks to take up lending slack.

Wells Fargo & Co., also under orders to raise capital, raised $8.6 billion in a stock sale on Friday, 25 percent more than it had planned. Morgan Stanley, also under a capital mandate, raised $8 billion by selling stocks and bonds.

Bank stocks skyrocketed last week as word of the stress test results leaked out, and economic news indicated that the recession may be easing. The KBW Index of large-bank stocks rose 12 percent on Friday and 33 percent last week.

The government named 19 banks that it considers too big to fail and ran them through the stress tests. The tests assumed that the recession gets much worse, with unemployment above 10 percent (it was 8.9 percent in April) and loans defaulting at rates greater than in the Great Depression.

The results divided the nation's biggest banks into two groups. Nine passed the test and got the government's seal of approval. They include U.S. Bank, which ranks first in the St. Louis market, holding 18 percent of the region's deposits in June 2008. The 10 other banks were told to raise more capital by November.

The results seemed to reassure investors, who had worried that the capital shortfalls could be much worse.

"It appears they'll be able to raise that capital very quickly," said Ken Crawford, portfolio manager at Argent Capital Management in Clayton.