Investors are also increasingly confident in a significant return of capital from Bank of America, as the company builds capital. The company reported Tier 1 common equity of $136.4 billion as of Sept. 30, increasing by $9.7 billion from the end of 2011. The estimated Basel III Tier 1 common equity ratio was 8.97% as of Sept. 30, meaning the company was just a hair under its fully phased-in Basel III minimum ratio, many years ahead of the Federal Reserve's requirement.
Atlantic Equities analyst Richard Staite on Dec. 13 said that he expected Bank of America to return about $6 billion in capital to investors during 2013 through stock buybacks and an increase to the quarterly dividend on common shares from its current nominal level of a penny.
The analyst estimated that by the end of 2013, Bank of America "will have $19bn in surplus capital and falling costs should have boosted earnings. We therefore forecast it will return $14bn in 2014 composed of a $4bn dividend and a $10bn buyback. This will put it on a par with [<b>JPMorgan Chase </b> <span class=" TICKERFLAT">(<a href="/quote/JPM.html">JPM</a><a class=" arrow" href="/quote/JPM.html"><span class=" tickerChange" id="story_JPM"></span></a>)</span>] where we forecast a $15bn capital return in 2014."
Staite rates Bank of America a "Buy," with a $12 price target.
Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.
Written by Philip van Doorn in Jupiter, Fla.