Monday, April 28, 2014

Bank of America's Bad Math: Dividend and Stock Buyback Suspended

Posted By on Mon, Apr 28, 2014 at 8:42 AM

The Feds have told Bank of America that it should hold off on any promised dividend hike and stock buyback for its shareholders until somebody at the corporate office is capable of doing some better math.

It turns out that B of A miscalculated the level of its overall capital in the wake of its 2009 buyout of Merrill Lynch. Simply put, the bank holds less capital than it had previously estimated.

The Federal Reserve says the bank must immediately address the errors in its regulatory capital calculations, and B of A said it would suspend its $4 billion stock buyback program in addition to a planned increase in its quarterly dividend.

This morning's announcement sent Bank of America shares down 4 percent before the start of trading today, and shortly after the opening bell on the New York Stock Exchange, B of A stock dropped even further.

Bank of America—the nation's second largest bank by assets—said it discovered the miscalculation April 16. It is now required to resubmit its capital plan within 30 days.

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