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Bank of America Mulls Dividend Hike

Bank of America CEO Brian Moynihan expects to implement a "reasonable" dividend policy over the next couple of years, though management is still held back by regulatory uncertainty.



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Bank of America

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CEO Brian Moynihan says the firm is planning to raise its dividend to a "reasonable" level within the next couple of years.

However, the process will begin only as soon as regulators outline "phase-in" periods for new capital standards.

>>>Bank Dividends May See Regulatory Stall

Banks must maintain at least an 8% ratio of top-quality capital to risk-weighted assets under new capital standards outlined by the international Basel Committee on Banking Supervision. For Bank of America, this Tier 1 common ratio stood at 8.45% as of Sept. 30.

During a conference call on Tuesday, Moynihan indicated that Bank of America "should run on 8.5 to 9%" without a problem as Basel and other U.S. regulations are implemented. But Ed Najarian, an analyst with ISI Group, questioned management's assumptions - saying it didn't seem as though a dividend was factored in before 2013.

"I wouldn't assume that," said Moynihan. "We didn't mean to create that impression...Embedded in here is a reasonable dividend policy."

Moynihan said management is simply waiting to get a clear policy from regulators regarding the timing of various new rules. In addition to the new Basel Accord - which clearly spells out requirements and timing - U.S. regulators are also figuring out how and when to implement "market risk" capital requirements as well as other parts of the Dodd-Frank financial reform bill.

"The regulators have been clear that they understand from you as investors that there has to be a sharing of this

capital as we build it up, and the idea was to build it up across time," said Moynihan.

Other big banks like

JPMorgan Chase

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Wells Fargo

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have been eager to boost dividends as well, but held back by the same regulatory uncertainty.

Bank of America is paying just a penny per share quarterly, down from 64 cents in mid-2008 and 32 cents by the end of that year. Wells' dividend is now 5 cents per share each quarter, vs. a 34-cent payout through early 2009.

JPMorgan cut its dividend to 5 cents per share from 38 cents per share in early 2009. Last week, JPMorgan CEO Jamie Dimon indicated that his bank may boost dividends as early as the first quarter of 2011. Dimon has said in the past that he'd like to restoring a 30% to 40% payout ratio as soon as possible.

"I think it makes sense to do," said Dimon on Wednesday. "I think some banks will start retaining far too much excess capital at one point next year."

-- Written by Lauren Tara LaCapra in New York


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