BofA still a Buy at Citi after marginal stress test result

Capital return estimates for Bank of America (BAC -0.3%) look a "tad" too high, says Citi's Keith Horowitz, following BofA's getting just a passing grade from the Fed's stress test - its Tier 1 common equity ratio of 5.9% (corrected from the original 6%) under the Fed's adverse economic scenario was the lowest among the 29 of 30 banks which passed.

Horowitz previously estimated BofA would go for a $5B buyback and a $0.03 boost to its dividend (currently just $0.01), but he's thinking a slightly dialed-back repurchase plan may be in order.

Investors will find out after the bell on Wednesday just how close the bank has decided to cut it. Nevertheless, Horowitz would buy any dip should the capital return announcement prove disappointing.

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Comments (5)
  • jackooo
    , contributor
    Comments (1738) | Send Message
    What we are looking at is a worse case scenario ONLY. Right? Well if BAC was the lowest doesn't that mean that their money was out drawing interest?
    25 Mar 2014, 03:10 PM Reply Like
  • june1234
    , contributor
    Comments (4474) | Send Message
    it passed as it will pass this one. they always do.
    25 Mar 2014, 04:21 PM Reply Like
  • cbmetcalfe
    , contributor
    Comments (91) | Send Message
    I agree w jackooo. It would seem to me that those who passed the test by the narrowest margin would have made the best management decisions. Why have extra $ sitting around when your business is to put $ to work for you? I like it.
    25 Mar 2014, 08:29 PM Reply Like
  • Jdeboer87
    , contributor
    Comments (334) | Send Message
    I guess if you were required to dial it back, you would first reduce the buy back. That would make sense.
    26 Mar 2014, 05:37 AM Reply Like
  • sreimer77
    , contributor
    Comments (242) | Send Message
    Actually they probably will maintain the buy back and dividend increase. Dividend increase has to happen or investor sentiment will go negative after last years non-request. Buy backs are means to further increase EPS and lower outstanding shares, remember a large # of shares were issued during financial crisis. BAC has a ton of cash and 5 Bil is a drop in the bucket! Every share they buy back is one less dividend that is paid out.
    26 Mar 2014, 10:28 AM Reply Like
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