NEW YORK (TheStreet) -- Bank Of America (BAC) long investors feel robbed. The company announced Monday that it would suspend a previously announced $4 billion in stock repurchases and $0.01 dividend increase due to discovered issues with previously reported capital amounts.
The stock fell more than 5% to $15.15 by midday. Sentiment soured to 44% bearish, according to StockTwits' analytics.
The bad news also softened the sector. Banks weakened across the board. The Financial Sector SPDR (XLF) fell 0.71% by midday. Bank of America said it incorrectly accounted for cumulative losses on Merrill Lynch structured notes, leading it to overstate capital amounts and ratios to regulators. The bank will resubmit its data and 2014 capital plan to the Federal Reserve Board. Bank of America said the adjustments do not impact prior earnings statements. However, estimated tier 1 capital ratio was revised down 21 basis points to 11.9%. The total capital ratio was also revised down 21 basis points to 14.8%. Estimated tier 1 leverage ratio was revised to 7.4%, down 12 basis points, according to the press release. Some investors said that the selloff would be short-lived. They argued that, even with the revisions, Bank of America is likely sufficiently capitalized to follow through with the previously announced share buyback plan and dividend raise.
$BAC Bottom line is they found an error but we don't know the size of the error. So selling today is panic. Could be much ado about nothing. - Keith (@tradinwarrior) Apr. 28 at 10:55 AMSome investors bet that the stock would bounce tomorrow after investors had time to digest the news. They were confident that the financial statements would reveal a well-capitalized, relatively well-run bank.
$BAC OPPORTUNITY here... Load up!! This bounces back no later than next week. - Frank Scalia (@Tank83) Apr. 28 at 11:36 AMHowever bearish investors on StockTwits.com argued that Bank of America's chart indicates longer-term declines. And they urged longs to sell any rallies or bounces tomorrow. Many doubted that Bank of America would ultimately keep its promises to shareholders once the government reviewed its new data.
I think if do get that bounce in $BAC it will only be temporary and you fade any strength. Looks like heading a lot lower - J.C. Parets (@allstarcharts) Apr. 28 at 11:45 AM
$BAC bear flag justbroke down... sorry guys this is heading to 13.50ish.. been long since 5.06.. got out at 17.12 - Peter Boyadjian (@m3azzkicker) Apr. 28 at 11:18 AM
@RobotTraders @tradinwarrior Obviously $BAC does not have the cash or they would not cancel their buy back and dividend. this is epic fail - QE4eversayswhat (@QE4eversayswhat) Apr. 28 at 11:03 AMAt the time of publication the author had no position in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV