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March 24, 2011 in Business
Fed rejects Bank of America’s dividend increase
NEW YORK – It was one more blow for Bank of America: the Federal Reserve didn’t allow the nation’s largest bank to increase its dividends.
The decision by the Fed makes Bank of America Corp. the only one of the four largest U.S. banks that wasn’t able to raise its dividend, something shareholders have been clamoring for.
The Fed’s decision, which BofA disclosed in a regulatory filing Wednesday, also raised questions over whether the bank is strong enough to withstand another economic downturn.
For CEO Brian Moynihan, the Fed’s rejection was another setback in his 14-month tenure, which has been marked by a sharp increase in lawsuits, mounting losses from credit cards and decreased income from checking accounts. As recently as March 8, Moynihan promised shareholders they would likely see a dividend increase in the second half of the year.
“We have the capital. We have the brand, and now we’ve been building the balance sheet,” Moynihan said at a conference for investors.
Problem is, the Fed didn’t agree. Bank of America, along with the 19 largest banks in the country, was subject to a “stress test” in the first quarter. The Fed tested the banks’ balance sheet and other measures to see if they were strong enough to stand up to another economic downturn. Only banks that passed the test were allowed to increase dividends.
The Fed has now asked the Charlotte, N.C., bank to submit a revised plan, and it is unclear if it will be allowed to increase its dividend in the second half of the year.
“This is a reality check for Bank of America,” said Matt McCormick, a portfolio manager and banking analyst at Bahl & Gaynor Investment Counsel in Cincinnati, which manages about $3.2 billion in assets. “They have a lot of work in front of them.”
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detroitdude on March 24 at 8:44 a.m.
Good. Bank of America sucks. If you have some money in your pocket and would like to put it into the worst bank available, this would be the one. Besides the fact that they process debited transactions very slowly, to the point that sometimes expenses show up in your register almost 7 days later, their “fraud protection” is a joke. They state that unauthorized transactions will be remanded to your account within 1 business day, well before I took my business elsewhere that happened to me, try 29 days.
johnclarke on March 24 at 2:04 p.m.
People, join a credit union. If you ever think you can’t make a difference, you are wrong. You do it, encourage your friends and family.
Bank of America should be broken up.
DemoDriver on March 24 at 3:13 p.m.
Shouldn’t we take a really really GOOD look at the innermost workings of the Federal Reserve and shed some light on the cobwebs?
The level of control now exercised over our monetary system of late reminds me of a classic quote from Henry Ford, who said, “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.”
It’s a shame Texas Senator Ron Paul’s bill to fully audit the Federal Reserve was gutted in the Senate.
Where’s WikiLeaks when we need them?