Bank of America Corp. (BAC), the top performer in the Dow Jones Industrial Average this year, may commit as much as $10 billion to dividends and share repurchases in 2013, said International Strategy & Investment Group Inc.
The lender has improved capital by the most among the biggest U.S. banks and could fare comparatively well after Federal Reserve stress tests, Ed Najarian, an ISI analyst, said yesterday in a research note. Bank of America may have the equivalent of about $30 billion in capital beyond the minimum required by regulators, he wrote.
“We certainly don’t expect Bank of America to return anywhere near $30 billion in capital,” said Najarian, who has a buy rating on the Charlotte, North Carolina-based company. “We still think $5 billion to $10 billion in total dividends and stock buybacks is likely for 2013, which would still be an upside surprise versus Street expectations.”
Bank of America’s dividend of 1 cent a share, smaller than the payouts of JPMorgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC), is a vestige of the duress the lender faced when it took $45 billion in U.S. bailouts after swallowing Countrywide Financial Corp. and Merrill Lynch & Co. While the rescue was repaid in 2009, regulators haven’t allowed the firm to boost its dividend.
Najarian, who had a hold rating on Bank of America since July 2010, upgraded the stock to buy this month, according to data compiled by Bloomberg. He said he expects the shares to hit $12 within a year. Bank of America climbed 4.1 percent to $9.49 in New York yesterday and has advanced 71 percent in 2012.