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BofA to Redeem Preferred Stocks

Zacks Equity Research

Moving ahead with its strategy to remove high-cost debt, Bank of America Corp (BAC) announced the redemption of certain non-cumulative preferred stocks. BofA will be redeeming approximately $76 million worth of preferred stock.

BofA submitted the redemption notices for 2.38 million shares of 6.70% non-cumulative perpetual preferred stock, Series 6 and 663,815 shares of 6.25% non-cumulative perpetual preferred stock, Series 7. All these stocks will be redeemed at a price of $25 per share on Jun 28.

The company has already received all the essential approvals for the transaction. BofA will be utilizing the proceeds from the issue of non-cumulative perpetual preferred stock, Series U to fund the redemption. The Series U preferred stock offerings were announced on May 21.

Further, BofA stated that since the redemption dates for both Series 6 and Series 7 are also the dividend payment dates, the redemption price does not include any declared and unpaid dividends. Hence, the total redemption price is $59.4 million for Series 6 and $16.6 million for Series 7 preferred stocks.

In April, BofA had announced sending notices to redeem roughly $12 billion worth referred stocks. The company redeemed 8.20% non-cumulative preferred stock, Series H, on May 1, and 8.625% non-cumulative preferred stock, Series 8, on May 28. It also redeemed 11.445% Preferred Securities of Progress Capital Trust II worth $6 million on May 1.

The redemption of the above-mentioned preferred stocks will not only lower BofA’s interest expenses but lead to an improvement in its balance sheet as well. Notably, the company has been striving to enhance its efficiency by divesting or closing non-core operations and reducing expenses.

Currently, BofA carries a Zacks Rank #3 (Hold). Better performing banks include JPMorgan Chase & Co. (JPM), Zions Bancorp. (ZION) and The Goldman Sachs Group, Inc. (GS), all of which carry a Zacks Rank #2 (Buy).

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