WASHINGTON (AP) — Federal regulators have given Bank of America a green light to proceed with a long-awaited dividend increase it had suspended because of a reporting error.
The Federal Reserve announced Wednesday that it has accepted the revised capital plan filed in May by the second-largest U.S. bank. Bank of America Corp. disclosed in April that it discovered the error, on the value of securities, in a financial report it submitted to the Fed. The data in the report were used to calculate results of an annual “stress test” of the bank conducted by the Fed this year.
Under the revised plan, Bank of America will increase the dividend from a penny per share to 5 cents per share. The plan dropped a $4 billion stock buyback that the bank had proposed earlier.
Bank of America, based in Charlotte, North Carolina, said Wednesday that its board had approved the dividend increase, payable Sept. 26. The bank noted it was its first dividend increase in seven years, saying the move reflects “significant progress” the bank has made to bolster its finances and build up capital to cushion against potential losses.
The Fed approved Bank of America’s original plan in March after the bank passed the Fed’s stress test. The tests are an annual check-up of the biggest U.S. financial institutions. This year 30 banks underwent the tests to determine if they have large enough capital buffers to keep lending through another financial crisis.
Then in April, Bank of America disclosed the error, which was related to how it valued securities obtained in its acquisition of Merrill Lynch in 2009 during the crisis. The bank slightly overstated the amount of capital it held and other financial ratios – crucial measures of a bank’s health that help investors and regulators determine how much of a financial cushion it has to help it survive another financial meltdown.
Bank of America shares rose 30 cents, or 2 percent, to $15.30 in late morning trading.