Bank of America Corp. (BAC) fell the most in a year after suspending a dividend increase and $4 billion of planned share repurchases because of an error in its stress-test submission to the Federal Reserve.
Bank of America will resubmit its proposal, the Charlotte, North Carolina-based lender said today in a statement. The company said it incorrectly adjusted for cumulative realized losses on structured notes issued by Merrill Lynch.
Chief Executive Officer Brian T. Moynihan had planned on boosting the bank’s quarterly payout to 5 cents a share from 1 cent, five years after the firm cut the dividend to a token amount during the financial crisis. Bank of America said today its revised proposal will probably feature lower payouts than in its original plan.
“Bank of America is by far not the first big bank to make a mistake in its CCAR submission,” David Hilder, an analyst at Drexel Hamilton LLC in New York, said in a phone interview, referring to the Fed’s Comprehensive Capital Analysis and Review. He said that while Bank of America noticed the error and probably has sufficient capital for the payout, the setback is “embarrassing” for the company.
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The stock fell 5.2% to $15.13 at 9:48 a.m. in New York, the biggest intraday slide since April of last year.
The bank’s estimated Tier 1 capital ratio is actually 11.9% as of March 31, which is 21 basis points below what the company previously reported, according to today’s statement. The Tier 1 leverage ratio was 7.4%, or 12 basis points lower. A basis point is 0.01 percentage point.