Bank of America Corp., the second- largest U.S. lender, won Federal Reserve approval to buy back as much as $5 billion in stock, the firm’s first repurchase program since the financial crisis.
Bank of America can also redeem $5.5 billion in preferred shares, the Charlotte, North Carolina-based company said Thursday in a statement. The company said it didn’t seek approval to boost its 1-cent quarterly dividend. Analysts surveyed by Bloomberg predicted on average that the dividend would increase to 3 cents, with some estimates as high as 5 cents.
Buying back stock may help rebuild the credibility of Brian T. Moynihan, 53, who has made restoring shareholder payouts a priority since 2010 when he became chief executive officer. Moynihan came under fire in 2011 after fanning investor expectations for a “modest” dividend increase, only to have the Fed reject his request, and he didn’t ask the central bank for anything last year.
The Fed blessing starts to make good on a vow Moynihan made at the lender’s March 2011 investor day, in which he proclaimed the bank, which had been the biggest in the U.S., was once again a “growth company” that could return capital to shareholders.
The lender slashed its 64-cent dividend in 2008 to conserve capital and took $45 billion in U.S. bailouts under then-CEO Kenneth D. Lewis. Even after repaying the funds in 2009, Bank of America couldn’t increase payouts because of demands to improve capital ahead of coming international rules.
The firm also trailed JPMorgan Chase & Co. and Wells Fargo & Co. in putting the financial crisis behind it because of more than $40 billion in costs tied to defective mortgages inherited from the 2008 takeover of Countrywide Financial Corp.
Bank of America’s capital levels rose to a record 9.25 percent last year after Moynihan sold more than $60 billion in assets and purged expensive debt from its balance sheet. Shares more than doubled in 2012, the biggest gain in the Dow Jones Industrial Average, and climbed 3.9 this year through March 13.
--Editors: Rick Green, Dan Kraut
To contact the reporter on this story: Hugh Son in New York at firstname.lastname@example.org
To contact the editors responsible for this story: David Scheer at email@example.com; Rick Green at firstname.lastname@example.org
© Copyright 2014 Bloomberg News. All rights reserved.