Bank Of America Corp (NYSE:BAC) Plans $4 Billion Stock Buyback

Bank Of America Corp (NYSE:BAC) intends to return $4 billion to shareholders in the form of shares repurchase. The bank received conditional approval from the Fed that allows it to restart stock buyback after it failed to do so last year. However, Bank Of America will have to resubmit a reworked capital plan to the regulator to answer some concerns that arose from its stress test.

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Bank Of America Corp (NYSE:BAC)’s plans to return more money to shareholders can now take off. While the bank will be able to return $4 billion to its shareholders in reinitiated buyback program, Bank Of America cannot hike dividend. The company will continue to pay an annual dividend of $0.05 a share, keeping it the same from the previous year.

Commenting on the clearance by Fed to buy back shares, Bank Of America Corp (NYSE:BAC)’s CEO, Brian Moynihan, said that repurchasing shares was the best way to drive more value to shareholders. For Moynihan, one of the major challenges has been raising capital return to investors. Previous efforts to do so were halted by the regulator.

All is not done

There is still a challenge for Moynihan even with the latest buyback clearance. That is because there is no guarantee that the announced buyback program will remain intact or take off as planned given that it depends on the outcome of the resubmitted capita plan. Bank Of America Corp (NYSE:BAC) will rework its plan and submit it again by September 30. Fed could ask for adjustment of the capital distribution plan if it is not satisfied with the modified plan.

Others banks get way with dividend request

Among the six major U.S. banks, Bank Of America Corp (NYSE:BAC) was the only one that was denied the opportunity to hike dividends. Other banks such as Citigroup Inc (NYSE:C), Goldman Sachs Group Inc (NYSE:GS) and Morgan Stanley (NYSE:MS) secured approval for dividend raise. Citigroup intends to hike its dividend payout to $0.05 from $0.01 that it used to pay.

CEO pay cut

Bank Of America Corp (NYSE:BAC)’s Moynihan was promoted by the board to the position of chairman, but his pay was cut to $13 million from $14 million.

John Eisler

John Eisler

John is a special projects and general assignment reporter, noted for breaking several exclusive stories.