Bank of America is to suspend stock repurchases, a dividend increase and will resubmit a capital plan, after it uncovered an incorrect accounting adjustment. If it gets regulatory approval to start them again, it'll likely be returning less to shareholders than it initially promised, the Wall Street Journal reports
The company said it will review its financial accounts and plans to request a capital action plan that is less than its previously announced 2014 plan.
The suspension of its capital-return plans happened at the "request" of the Federal Reserve after the bank told the Fed of the miscalculations, according to a Bank of America statement.
Bank of America had been approved to spend $4 billion on buybacks and planned to increase is quarterly dividend from 1 cent to 5 cents per share.
The company said it "will expeditiously resubmit" its proposed capital plan to the Fed but that it "expects the requested capital actions...will be less than the company's previously announced 2014 capital actions."
If the bank doesn't get a fresh approval from the Fed by the time it's supposed to pay its dividend, it would pay a penny per share, the Journal noted.
TheStreet Ratings team rates BANK OF AMERICA CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate BANK OF AMERICA CORP (BAC) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The gross profit margin for BANK OF AMERICA CORP is currently very high, coming in at 84.82%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.08% is in-line with the industry average.
- Compared to its closing price of one year ago, BAC's share price has jumped by 32.73%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- BANK OF AMERICA CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BANK OF AMERICA CORP increased its bottom line by earning $0.91 versus $0.25 in the prior year. This year, the market expects an improvement in earnings ($0.96 versus $0.91).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 13.2%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF AMERICA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
- You can view the full analysis from the report here: BAC Ratings Report