BofA to Redeem Preferred Stocks

Zacks

After receiving the approval for its new capital plan from the Federal Reserve, Bank of America Corporation (BAC) has started the implementation of the same. BofA announced that it has sent notices to redeem certain preferred stocks.

BofA will be redeeming 8.20% non-cumulative preferred stock, Series H, on May 1, while 8.625% non-cumulative preferred stock, Series 8, will be redeemed on May 28. The preferred stocks will be redeemed at a redemption price of $25 per depositary.

Further, BofA stated that since the redemption dates for both Series H and Series 8 are also the dividend payment dates, the redemption price does not include any declared and unpaid dividends. Hence, the total redemption price is $2.86 billion for Series H preferred stock and $2.67 billion for Series 8 preferred stock.

Concurrently, BofA declared that it will be redeeming 11.445% Preferred Securities of Progress Capital Trust II worth $6 million on May 1. The company will pay an aggregate amount of $1,078.21 including the accumulated and unpaid distributions per preferred security.

The redemption of the above-mentioned preferred stocks will not only lower BofA’s interest expenses but at the same time lead to improvement in its balance sheet. The company, incidentally, has been striving hard to improve its efficiency by divesting or closing non-core operations and bringing down expenses.

These initiatives of BofA are now bearing fruits, which were further authenticated by the Fed, when the company’s new capital plan was approved last month. The plan included redemption of the aforesaid preferred stocks and a $5 billion stock repurchase program.

Currently, BofA retains a Zacks Rank #3 (Hold). Other major regional banks that are worth considering include JPMorgan Chase & Co. (JPM), State Street Corporation (STT) and Citigroup Inc. (C). All these carry a Zacks Rank #2 (Buy).

 

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