Bank of America Corp (NYSE:BAC) Stress Test Results and Claim Settlements

by Eric Jacobson | Monday, Mar 31, 2014 | 4451 views

Boston, MA, 03/31/2014  (usastockreports) –Bank of America Corp (NYSE:BAC) has received major boost when its capital plan was approved by US Federal Reserve which includes repurchase program of $4 billion shares and increase in quarterly dividend by 5 cent. This is good news for the company who was unable to pass the stress test of the last year, much to embarrassment of the company.

Teat Clearance Planning

For this year, it took extra caution to pass the test and due to this its performance in the stress test was “adequate”. The firm keeping an eye over rejection lowered the request, so the proposal was accepted. The second largest bank of the US did well in the market front after the result of the stress test. This will be good news for the CEO of the Company Brian T. Moynihan, who was the brain behind raising the payout from the token level. This rate was being adopted by the company since the financial crisis. On the other hand City has failed to pass the stress test of US Fed Reserve.

Settlement Terms and Conditions 

On the other hand the Bank of America Corp (NYSE:BAC) has agreed to pay $9.3 billion to settle the issues with Fannie Mae and Freddie Mac. The Bank was charged by them for selling fault mortgage bonds. Federal Housing Finance Agency (FHFA) acted as a conservator to settle this issue. The Bank will pay approximately $6.3 billion in cash and rest the Bank will buy residential mortgage-backed securities (RMBS) from these two housing entities.

The bank and its former CEO Lewis agreed to settle the lawsuit which was filed by New York AG, charging the Bank to mislead its investors. The case is related to acquiring of Merrill Lynch & Co, when it was facing losses and the financial crisis at that time was at its peak.

Impact on First Quarter Financial Result

The result of the first quarter can be affected by this settlement and the bank expects that there will be decrease of 21 cents/share in the income of the first quarter. We will be able to know when the financial result will be out on April 16, 2014.

Tread with Caution

Bank of America Corp (NYSE:BAC) finally hopes to perform well in this fiscal year. The passing of stress test and settlement of claims will give a huge boost to the company. It will be able to generate confidence in its investors.

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