Bank of America (BAC) Reputation Suffers Due to 2014 Capital Plan Setback, Says Analyst

Bank of America (NYSE: BAC) stock declined Monday after it said it will suspend its previously announced capital actions and resubmit its 2014 capital plan. The change is tied to incorrect calculation of regulatory capital. In the view of analyst Matthew H. Burnell of Wells Fargo, weakness in the stock is due in part to reputation damage.

"BAC expects to resubmit its capital plan and engage a third party to review its capital planning processes and the related materials before resubmission. While we do not anticipate the actual net effect on BAC's capital or EPS will be overly material, we believe the combination of reputational damage, upward pressure on expenses and potentially more conservative capital return request in 2015 will cloud BAC's share price performance for the next few months (similar to BBT's underperformance following its 2013 CCAR challenges)," said Burnell.

"More immediately, we anticipate BAC will underperform its peers today," he added. "BAC's miscalculation of legacy Merrill Structured notes reduces its estimated Basel III fully-phased-in-T1CC ratio under the standardized approach to 9.0% (27 bps from the earlier estimate of 9.3%) and the ratio under the advanced approaches methodology to 9.6% (29 bps from its prior estimate). These numbers suggest the size of the regulatory capital miscalculation and restatement of prior quarters' regulatory capital was roughly $4B. The restatement has no effect on BAC's balance sheet ratios."

Wells Fargo has a Market Perform rating on Bank of America.

For an analyst ratings summary and ratings history on Bank of America click here. For more ratings news on Bank of America click here.

Shares of Bank of America closed at $15.95 yesterday.

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