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Bank of America Capital Blunder Seen Weighing on Shares for Months

Stocks in this article: BAC BBT

Bank of America dividend story updated from 9:18 a.m. with new share price and comments from Wells Fargo analyst Burnell at start of story.

NEW YORK (TheStreet) -- Bank of America's  (BAC) miscalculation of its capital ratios may have been small in numerical terms, but the fallout is likely to keep the bank's share price subdued for months, according to an analyst report published Monday.

"While we do not anticipate the actual net effect on BAC's capital or EPS will be overly material, we believe the combination of reputational damage, upward pressure on expenses and potentially more conservative capital return request in 2015 will cloud BAC's share price performance for the next few months,"  wrote Wells Fargo analyst Matt Burnell, comparing the situation to difficulties BB&T  (BBT) had with its stress test in 2013. 

Bank of America said early Monday it miscalculated its disclosed capital ratios and will suspend a planned dividend raise and share buyback it announced in late March.

The giant bank attributed the error to "an incorrect adjustment related to the treatment of certain structured notes" it assumed during the acquisition of Merrill Lynch completed at the start of 2009.

Shares were down by 4.51% to $15.23 more than an hour after the start of trading Monday.

Bank of America had planned to raise its quarterly dividend to $0.05 per share from $0.01 per share and buy back up to $4 billion in shares. The bank said Monday it would suspend those plans and submit a new plan to the Federal Reserve.

Chris Kotowski, an analyst at Oppenheimer & Co. said in a research note "the adjustments appear relatively minor," and maintained his "outperform rating.

"This is obviously a black eye for the company and will likely lead to near-term pressure on the stock. However, we continue to think it is a good value and patient investors will be rewarded for staying with the stock," Kotowski wrote.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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