Bank of America Corp (NYSE:BAC) announced it has passed the US governments stress test which is required under the Dodd-Frank Act. The test is done yearly and indicates a banks fiscal solvency. The Federal Reserve also conducts the test while the bank does its own version. The two results may differ but the Federal Reserve’s version carries more weight.
The tests are critical in protecting the banks customers from the company’s failure to stay solvent. The banks version of the test does not include the potential impact of capital actions that are in excess of its current dividends and contractual obligations. It also is in no way an accurate indicator of the banks future financial results, including its subsidiaries. In other words, passing the stress test is not an indication of future earnings potential. The common stock dividends are calculated using DFAST instructions and are equal to the quarterly average dollar amount of the company’s common stock in dividends paid the previous year.
Bank of America Corp (NYSE:BAC) is facing a lawsuit with Merrill Lynch that was filed by two former financial advisor trainees. The trainees claim they were not paid overtime rates while they were working 10-hour days along with long nights and weekends. They are accusing the company of violating the Fair Labor Standards Act. They are looking to file on behalf of over a 100 other trainees that worked for the company’s Practice Management Development program. The lawsuit is estimated to have a total impact of $5 million and covers the trainees of the program starting in April of 2011. The plaintiffs claim they were not fairly compensated in the development stage of the program but they were expected to generate leads for potential bank clients. The company had no statement at this point of the filing.
The stock is still in a channel around $16 but its internals are getting stronger as the MA divergence compresses itself. It’s at solid support and the next resistance is a band at $16.50.