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Big Banks: Capital Deployment Winners and Losers

Bank of America (BAC) said late Thursday it would keep its quarterly dividend at a nominal 1 cent a share, but would also repurchase up to $5.0 billion in common shares, while redeeming roughly $5.5 billion in preferred shares. Atlantic Equities analyst Richard Staite in a report Friday said Bank of America's buyback plans are "much larger than the consensus forecast of $1.9bn and should more than offset any disappointment that the dividend was held flat at $0.01 (consensus expected $0.03)." Bank of America's shares were up over 3% in early trading, to $12.51.

Regions Financial of Birmingham, Ala., announced it would increase its quarterly dividend to $0.03 a share from 1 cent, with buybacks totaling up to $350 million. The company said its approved capital plan also allows it to repurchase up to $500 million in trust preferred securities. The excess capital deployment follows the company's 2012 transformation, which included the sale of its Morgan Keegan brokerage unit, a common equity raise and repayment of government bailout funds. Shares of Regions were up 0.5% in early trading, to $8.35.

KBW analyst Christopher Mutascio in a report late on Thursday said "dividend requests from RF and BAC were conservative in nature, while buybacks came in ahead of expectations. We believe market perception will be positive, as the announcements validate the progress both institutions have made on the capital front."

Capital One (COF) announced a large increase in its quarterly dividend, to 30 cents a share from 5 cents, although the company announced no share buybacks. FBR analyst Paul Miller in a report on Friday said "The Fed's approval of Capital One's capital plan signals confidence in COF's prospects and increasing likelihood for material share repurchases in 2014. We continue to view COF shares as attractive given the company's high return on equity and increasing ability to return additional capital into 2014." Capital One's shares were up slighlty in early trading, to $54.61.

State Street (STT) of Boston announced an increase in its quarterly dividend to 26 cents a share from 24 cents, and up to $2.1 billion in share buybacks. KBW analyst Robert Lee estimates the company's 2013 capital deployment will be "86% of capital generation net of share issuance." The analyst in a report late on Thursday that "STT may begin to draw down excess capital is a positive factor in helping to improve [its return on equity] going forward." State Street's shares were down slightly in early trading, to $59.81.

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