BofA has entered into agreements with certain holders of (non-government) perpetual preferred shares to exchange their holdings of approximately $9.5 billion of perpetual preferred stock into approximately 704 million shares of common stock. This results in a total benefit to Tier 1 common capital of $9.5 billion.
Other capital-enhancing elements already achieved include, $13.5 billion from the direct sale of common stock, a capital gain from the sale of shares in China Construction Bank, a $2.1 billion benefit from the deferred tax asset due to the increase in Tier 1 Capital, approximately $1.3 billion in reduced dividends on preferred shares over 2009-2010 associated with the shares exchanged into common stock and almost a $2 billion benefit from other dispositions.
As per the bank’s capital plan, it can issue an additional 296 million common shares that will result in further reductions in preferred dividends. Bank of America hopes to use the majority of the proceeds from these initiatives to reduce reliance on government support for the company.
BofA now believes that it can comfortably exceed $33.9 billion capital buffer identified by the Federal Reserve’s Supervisory Capital Assessment Program (SCAP). Joe Price, CFO, said: “We are pleased to have nearly reached our goal this quickly.”
