Bank of America fell 16 cents, or 1.6 percent, to $9.84 in 9:45 a.m. New York Stock Exchange trading. That's the lowest since May 2009, when the company still held $45 billion in U.S. bailout funds to help it survive the global financial crisis.
Moynihan has previously had to revise guidance about the bank's dividend after the Fed rejected what he called a "modest" increase requested for later this year. His deals to settle disputes over defective mortgages, including an $8.5 billion accord last month, means the CEO may have to adjust another promise to investors -- a larger dividend boost by 2013.
In March, Moynihan said that all $42 billion of projected earnings in 2013 and 2014 would be returned to shareholders. Bank of America was "committed" to raising its 1-cent dividend to a higher level equal to 30 percent of earnings, he said.
"We go from being a company which gets its capital in shape in 2011 and 2012 and pays a modest dividend to a company which has significant capital generation from there on out," Moynihan said at the March 8 conference. The result would be a total of $12 billion in payouts during those two years, he said.
Mortgage Disputes
That plan may be stymied as Moynihan writes checks to settle disputes inherited from the 2008 takeover of subprime lender Countrywide Financial Corp., whose lax underwriting led to soaring defaults on mortgages and claims from investors who bought or insured them. He announced a $3 billion accord with Fannie Mae and Freddie Mac in January, a $1.6 billion deal with bond insurer Assured Guaranty Ltd. in April and the $8.5 billion settlement with institutional investors last month.
With the costs climbing, Bank of America last month cut its 2013 forecast of its capital ratios under the new rules to 6.75 percent to 7 percent, from 8 percent in April. That estimate is based on the premise that the rules are fully enforced in 2013.
Executives and analysts expect the rules will be phased in over several years, making it less likely that Bank of America will be left short on capital and be forced to sell new shares. The added time would allow the bank to reach its goals by retaining earnings or getting rid of riskier assets that require a lender to hold more capital to cushion losses.
China Construction Stake
The bank is weighing the sale of at least part of its $21 billion stake in China Construction Bank Corp., three people briefed on the plans said last month. The sale would simultaneously raise cash and reduce assets that are penalized under the capital rules.
Bank of America, which under Basel rules may be labeled a systemically important financial institution, or SIFI, expects to have $1.8 trillion in risk-weighted assets by 2013 and said it intends to reduce that figure to ease capital needs. To meet the 9.5 percent standard, the bank would have to hold about $171 billion in capital. That compares with $122 billion for the 6.75 percent ratio.
The bank will "take a hard look at our balance sheet and the businesses that we were in if, with the SIFI, you were up at 9.5 percent," former Chief Financial Officer Charles Noski said in March. He was replaced by Bruce Thompson last month.