Bank of America revised its previously announced regulatory capital ratios downward and suspended its share buyback, the company said Monday.
The revision was due to an incorrect adjustment related to its 2009 acquisition of Merrill Lynch. Sources told CNBC the errors were discovered in the last few days in the process of preparing the bank’s quarterly report.
“As a result, the company is making the following adjustments to the previously announced estimated preliminary capital ratios for the first quarter ended March 31, 2014: the estimated Basel 3 Standardized transition common equity tier 1 capital ratio was revised to 11.8 percent, down 5 basis points; the estimated tier 1 capital ratio was revised to 11.9 percent, down 21 basis points; the estimated total capital ratio was revised to 14.8 percent, down 21 basis points; and the estimated tier 1 leverage ratio was revised to 7.4 percent, down 12 basis points,” the company said.
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Following the release, BofA stock fell 2 percent before the opening bell. (Click here to track its shares.)
The company said it would suspend its $4 billion stock buyback program and the planned increase in its quarterly dividend after the miscalculation. The bank had planned to raise its quarterly dividend to 5 cents a share from 1 cent a share.
The U.S. Federal Reserve said on Monday Bank of America will have to redo a capital plan it had submitted as part of the Fed’s annual stress tests, and that it told the bank to suspend any raises in shareholder capital distribution.
Bank of America had disclosed it had incorrectly reported data used in the calculation of regulatory capital ratios, and submitted those as inputs for the stress tests, the Fed said.
The bank had to resubmit its capital plan within 30 days, and correct the errors, but the Fed said it could still extend that period.
“Until receiving notice that the Federal Reserve has not objected to the new capital plan, Bank of America will not be able to increase its capital distributions, including those increases approved during the (stress tests),” the Fed said.
It is unclear if the bank’s adjustments would push bank to fail “stressed scenarios.” The bank said it believes its adjusted levels are still compliant with Basel III.
—With reporting from CNBC’s Kate Kelly
—CNBC.com with Reuters