Does Bank of America Know What It’s Doing?
Bank of America (NYSE:BAC) is in it deep this time since the recent announcement that regulators have suspended their plan to buy back $4 billion more shares from the bank and raise its dividend after the bank discovered a problem in its stress-test submission to the Federal Reserve.
The bank’s announcement of its capital level being reduced by three-quarters of the extra money the Fed had planned in returning to the shareholders of the bank over the next year sent the bank’s shares tumbling down 6.3 percent this week to close at $14.95, the biggest one-day decline in the stock since November 2012, Reuters noted.
The problem, according to The Wall Street Journal, were the so-called structured notes that are bonds with maturity dates paired up with derivatives such as options, and their performance being tied to a range of underlying investments including broad-market equity indexes such as the S&P 500, emerging market currencies, and commodities.
Merrill Lynch said in a statement that the lender will resubmit its proposal after finding the flawed accounting in its books. Ironically enough, according to Bloomberg, Bank of America CEO Brian Moynihan had planned to quintuple his quarterly payout to 5 cents a share, five years after the bank cut the dividend to the value of a token during the financial crisis.