SOURCE: The Bedford Report

The Bedford Report

December 08, 2011 08:16 ET

Federal Reserve May Thwart Dividend Plans From Bank of America and Citigroup

The Bedford Report Provides Equity Research on Bank of America & Citigroup

NEW YORK, NY--(Marketwire - Dec 8, 2011) - Citigroup and Bank of America remain two of the very few Money Center Banks that have yet to boost their dividends. There is a risk shareholders will have to wait even longer for these banking giants to increase dividends as The Federal Reserve plans to stress test large US banks against a hypothetical market shock. The Fed plans to use the stress tests to determine whether banks are strong enough to raise dividends or repurchase stock. The Bedford Report examines the outlook for companies in the Money Center Banking industry and provides equity research on Bank of America Corporation (NYSE: BAC) and Citigroup, Inc. (NYSE: C). Access to the full company reports can be found at:

Regulators said they will publish full results next year of the stress tests of the biggest US banks. Last month The Fed imposed the tougher standards on the 31 largest US Financial Institutions, releasing the criteria for measuring their wherewithal if the US economy sours and major trading partners default on their debt. The Fed said that tests "will be based on market price movements seen during the second half of 2008," when financial markets froze following the bankruptcy of Lehman Brothers Holdings Inc.

The Fed guidelines will apply to Citigroup, Bank of America, JP Morgan, Wells Fargo, Goldman Sachs and Morgan Stanley -- all of which have large trading operations.

The Bedford Report releases market research on the Money Center Banking industry so investors can stay ahead of the crowd and make the best investment decisions to maximize their returns. Take a few minutes to register with us free at and get exclusive access to our numerous analyst reports and industry newsletters.

According to The Wall Street Journal, "the stakes are particularly high for Bank of America, one of the few banks restricted in the last test from increasing its dividend." Brian Moynihan, chief executive of BofA, has refrained from expressing any hope for a dividend increase in the foreseeable future. "I've said we are not going to ask for a dividend until I'm sure we've got the capital picture solved along any dimension and that we can get approval," Moynihan said.

Citigroup may also be forced to temper dividend plans, Bloomberg reports. The Fed limited banks to returning 60 percent of their retained earnings to shareholders in 2011, split evenly between dividends and share repurchases.

Buckingham Research analyst Jim Mitchell is more optimistic about regarding Citigroup's shareholder return. The analyst said he expects Citigroup to pay a quarterly dividend of 15 cents per share in 2012.

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