When the Basel III capital requirements are fully phased in, in 2019, the large "global systemically important financial institutions," including Bank of America, JPMorgan Chase (JPM - Get Report), Citigroup (C - Get Report), Goldman Sachs (GS), Morgan Stanley (MS) and others, will be required to hold additional capital buffers of up to 3.5%, beyond the required Tier 1 common equity ratios of 7.0%. On Nov. 1, the international Financial Stability Board updated its list of GSIFIs, and listed the additional capital buffer requirements of each.
Wells Fargo analyst Matthew Burnell on Nov. 2 said that "the biggest surprise was that BAC's GSIB core capital buffer requirement was 150 bps, 100 bps below the level of the two other U.S. based universal banks Citi and JPM (which were placed at 250 bps). The buffers for GS and MS were set at 150 bps."
Burnell rates Bank of America "Market Perform," and said that the lower Basel III capital requirement for the company was driven by its "international retreat" and efforts to lower its risk-weighted assets. "More importantly, the lower buffer could fan hopes for faster capital repatriation than expected in 2013 and beyond though we expect its placement on this list will have relatively little effect on BAC's capital return in 2013."
Still, following the completion of the next round of Federal Reserve stress tests late in the first quarter, the analyst expects an increase in Bank of America's quarterly dividend on common shares to five cents from its current nominal level of a penny, along with $1.0 billion in share buybacks during 2013, for "a 30% total payout ratio."BAC data by YCharts
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