- It is not often that I do a 180 degree about face on any stock.
- If it is true that there have been no downward revisions and the Fed allows the buybacks and dividend hike to happen, Bank of America will move higher.
- The ongoing litigation issues could keep this stock volatile, however.
I have written about my bearish opinions of Bank of America (NYSE:BAC) too often not to face up to the apparent fact that I could very well be wrong about the stock. Given the new information released today, and the thumbs up by Dick Bove, the stock could very easily move higher sooner than later.
It could be a positive long term investment at that point.
If the information is accurate, and the Fed gives the ok for the dividend hike as well as the increased share buyback, then I would have been wrong completely, and officially state that to all of my readers.
The Bank Resubmits Its Plans
As of today, Bank of America has resubmitted its plans to the Federal Reserve. While it has been done sooner than I anticipated, the Fed has 75 days to make a decision on the new plan.
While there has been no details of the new plan, as stated in the noted announcement, I have to look at this in a much more positive light than I have been.
The Charlotte, N.C., bank gave few details about the resubmitted plan. It confirmed that the new request is smaller than the original--the bank had previously received permission to buy back up to $4 billion of its own shares and expand its quarterly dividend to 5 cents from 1 cent--but gave no specifics.
Even with a smaller plan, if the Fed gives the bank a thumbs up, the share price could likely move back to its 52 week highs in short order. Just by the simple fact that the issue would be resolved would be a catalyst to reverse the downward pressure.
Dick Bove Also Gives A Green Light To The Stock
Bove has been up and down on the bank but with the latest news he had this to say, as reported here.
The accounting error had zero impact on operations, says Dick Bove, and it now appears no impact on capital ratios either. Buy the stock, he says, as the higher dividend and initiation of the buyback should soon be re-approved. Bank of America Corp capital plan - initially approved by the Fed but then suspended following the error - was for a boost in the dividend to $0.05 per share from a penny, and a $4B buyback.
I am not convinced that the end of the litigation issues as outlined in my last article are over however. I still believe that there will continue to be an overhang until these issues settle down OR if the bank shows that it has enough reserves to pay for higher litigation costs.
I am not turning into a bull on the stock, but if the information turns into positive news from the Fed, then I will be completely wrong about my total bearish opinion.
The Bottom Line
Anyone can be wrong or right. I admit when I am wrong, given the unique circumstances, to set the record straight. Of course if the Fed decides to delay a decision, or to limit the scope of the plans, then all bets are off...again.
Disclaimer: The opinions of the author are not recommendations to either buy or sell any security. Please remember to do your own research prior to making any investment decisions.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.