Bank of America: Fiscal Cliff Crossed-Fingers Winner (Update 1)
Bank stocks were stronger than the overall market on Wednesday, as President Obama ended his Hawaii vacation early and Congress was set to return on Thursday, for further work on a compromise to avert the Fiscal Cliff.
Investors are also increasingly confident in a significant return of capital from Bank of America, as the company builds capital. The company reported Tier 1 common equity of $136.4 billion as of Sept. 30, increasing by $9.7 billion from the end of 2011. The estimated Basel III Tier 1 common equity ratio was 8.97% as of Sept. 30, meaning the company was just a hair under its fully phased-in Basel III minimum ratio, many years ahead of the Federal Reserve's requirement. Atlantic Equities analyst Richard Staite on Dec. 13 said that he expected Bank of America to return about $6 billion in capital to investors during 2013 through stock buybacks and an increase to the quarterly dividend on common shares from its current nominal level of a penny. The analyst estimated that by the end of 2013, Bank of America "will have $19bn in surplus capital and falling costs should have boosted earnings. We therefore forecast it will return $14bn in 2014 composed of a $4bn dividend and a $10bn buyback. This will put it on a par with JPMorgan Chase ( JPM) where we forecast a $15bn capital return in 2014." Staite rates Bank of America a "Buy," with a $12 price target. BAC data by YCharts Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.