Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Why Bank of America Corp (BAC) Is Higher Amid Light Volume: U.S. Bancorp (USB), Citigroup Inc. (C)

Page 1 of 2

Despite positive news on the job front this morning, there’s palatable angst underlying shares of the banks today, as investors wait to learn which of the nation’s 18 largest lenders will be allowed by the Federal Reserve to increase their quarterly dividend payouts and/or share buyback programs. With the announcement scheduled for 4:30 p.m. ET, shares of Bank of America Corp (NYSE:BAC) are up by $0.09, or 0.75%, in afternoon trading.

Investors breathed a collective sigh of relief last week after the Fed announced that 17 of the 18 banks examined via the now-annual stress test, passed it — click here to access our extensive coverage of the stress tests. The clear standouts were the regional lenders given their limited exposure to the risky world of investment banking. To name just one example, U.S. Bancorp (NYSE:USB) saw its tier 1 common capital ratio fall by only 70 basis points down to 8.3%, or well able the 5% minimum, after running the Fed’s “severely adverse” economic scenario. By comparison, JPMorgan Chase & Co. (NYSE:JPM)‘s and Citigroup Inc. (NYSE:C)‘s fell by 410 bps and 440 bps, respectively. And for its part, B of A’s ratio fell by 460 bps down to 6.8%.

Bank of America Corp (NYSE:BAC)The question now is whether or not the Fed will allow these lenders to increase the amount of capital they return to shareholders. As intimated above, the answer to this is a mere hours away, when the central bank releases the results of this year’s comprehensive capital analysis and review, or CCAR. Just to be clear, the stress tests are used by the Fed to determine whether a bank has sufficient capital to survive an economic downturn akin to the financial crisis, if not worse. Assuming it does, in the CCAR process, the Fed examines whether the bank should be allowed to return some of any excess capital to shareholders by means of a dividend increase or share buyback.

While some banks have already announced what they’ve asked for from the Fed in this regard, Bank of America Corp (NYSE:BAC) has stayed quiet. Citigroup Inc. (NYSE:C), for example, asked regulators for permission to buyback only enough stock to counter dilution from routine share issuances stemming from its compensation scheme. Meanwhile, JPMorgan’s buyback request was purportedly sliced in half compared to its $15 billion program last year, though analysts are expecting the bank to raise its quarterly dividend by $0.06 per share. And rounding out the top four banks, sans Bank of America Corp (NYSE:BAC), at the end of last year, the CEO of Wells Fargo & Co (NYSE:WFC)‘s announced that he would move to increase the amount that it distributes to shareholders. Prior to the crisis, the nation’s largest mortgage lender paid out anywhere between 35% and 50% of its earnings via dividends. Since then, that figure has only just reascended to the high-20% range.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!