SOURCE: The Bedford Report

The Bedford Report

March 15, 2011 07:35 ET

Will Bank of America and KeyCorp be Among the First Banks to Hike Dividends?

The Bedford Report Provides Analyst Research on Bank of America & KeyCorp

NEW YORK, NY--(Marketwire - March 15, 2011) - Investors are once again looking to major US banks as safe companies that will post steady profits and hopefully begin providing steady dividends. While certain major banks have said dividend increases are a top priority, others argue that now is not the right time to return cash to shareholders. The Bedford Report examines the outlook for companies in the Financial Sector and provides research reports on Bank of America Corporation (NYSE: BAC) and KeyCorp (NYSE: KEY). Access to the full company reports can be found at:

In the coming weeks, the Federal Reserve is expected to disclose the results of its latest round of stress tests. The crucial points of the tests are banks' ability to survive another recession as well as meeting regulatory capital requirements. Due to the recession, the Federal Reserve had barred major banks from increasing their dividends. As many of these banks repaid the bailout money, they began pressuring the regulators to let them restore their dividends.

Most of the largest banks are targeting a dividend increase in 2011 or 2012 to roughly 30 percent of earnings.

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Bank of America CEO Brian Moynihan says that he expects the company will be in a position to "modestly" raise its dividend in the second half of 2011, while in the years 2013 to 2014, and beyond, Moynihan believes the bank could be paying out $12 billion in regular dividends and be left with $30 billion more to spend on buybacks and special payouts.

KeyCorp is one of the few major banks remaining that has not repaid its TARP borrowings. One of the guidelines set by the Federal Reserve was that banks must make their required payments under the Troubled Asset Relief Program before any dividend hikes can take place. Henry Meyer, chairman and CEO of KeyCorp, says that while "repaying TARP is a top priority for Key" the company's patience was appropriate as it allowed KEY to strengthen its capital.

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