Tags: bank of america | bofa | buyback | federal reserve

BofA Raises Dividend, Drops Buyback as Fed Approves Capital Plan

Wednesday, 06 Aug 2014 10:37 AM

Bank of America Corp., the second-biggest U.S. bank, raised its quarterly dividend to 5 cents a share and dropped plans to buy back stock after the Federal Reserve approved its resubmitted capital plan for 2014.

The dividend increase, from 1 cent per share, was postponed in April after the Charlotte, North Carolina-based company said it made an error in its original Fed submission. The central bank said it didn’t object to the company’s revised plan.

Chief Executive Officer Brian T. Moynihan, 54, had to suspend the dividend increase and $4 billion of planned share repurchases after the company said it incorrectly adjusted for losses on structured notes issued by Merrill Lynch & Co. The boost to the dividend, which was cut to a token amount during the financial crisis, is the first in seven years.

“Shareholders were pressuring them more for the dividend than the buyback,” said Charles Peabody, a Portales Partners LLC analyst in New York. “In order to get a successful situation they decided to forgo the one for the other.”

The firm’s Tier 1 leverage ratio would drop to no lower than 4.1 percent in the Fed’s “severely adverse” scenario after including the lowered capital-return request. That cleared regulators’ 4 percent required minimum.

Peabody said it was a “shrewd move” to ask only for a higher dividend for now, because it sets the company up for the possibility of a buyback next March. Still, he said he expected a $2 billion share repurchase.

Bank of America rose 1.3 percent to $15.20 in New York trading at 9:35 a.m., the biggest increase in the 24-company KBW Bank Index.


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Bank of America Corp., the second-biggest U.S. bank, raised its quarterly dividend to 5 cents a share and dropped plans to buy back stock after the Federal Reserve approved its resubmitted capital plan for 2014.
bank of america, bofa, buyback, federal reserve
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2014-37-06
Wednesday, 06 Aug 2014 10:37 AM
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