NEW YORK (
Bank of America
is "at risk" of failing to keep up with a
timetable for strengthening its balance sheet, according to research published Tuesday by Creditsights, a credit research firm.
The Fed has yet to issue formal objectives for bank capital, but a newly-instated annual review requiring the largest U.S. banks to get permission to increase payouts to shareholders through dividends and share repurchases offers clues as to eventual regulatory requirements, the report states.
While Creditsights analysts expect U.S. regulators to follow the international capital regime known as Basel III, which has a seven-year phase-in period, they also believe the Fed may restrict dividend hikes and repurchases for institutions that are not on track to meet those requirements by the start of 2013.
"Bank of America remains at-risk of failing to meet the fully phased-in requirements" by the fourth quarter of 2012, the report states.
Nonetheless, Creditsights believes Bank of America will meet a "sliding Basel III phase-in schedule," so that regulators are unlikely to force an equity raise. As a result, the Creditsights analysts "expect the company to continue to improve its capital levels through asset sales, stock-based compensation and debt conversions for the most part."
Deutsche Bank analyst Matt O'Connor
, largely to retire outstanding preferred and trust preferred securities.
In addition to the standard Basel III requirements, Bank of America is also likely to incur an additional capital surcharge of 2%, according to the report, because of its status as a systemically important financial institution. Creditsights also sees a 2% surcharge for
, on the other hand, could see a higher surcharge of 2.5% because of their special importance in providing services such as clearing and custody in addition to their large capital market presences.
Written by Dan Freed in New York
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