Bank of America Corp., the best performer in the Dow Jones Industrial Average for 2012, has more than doubled since the start of the year as the company rebuilds capital and investor confidence.
Bank of America climbed 1.4 percent to $11.15 at 10:33 a.m. in New York, bringing its advance for this year to 101 percent. The second-largest U.S. lender by assets has more than quadrupled since February 2009 when the stock sold for $2.53 during the credit crisis amid speculation it would be nationalized.
Chief Executive Officer Brian T. Moynihan has targeted $8 billion in annual cost cuts and is boosting capital at the Charlotte, North Carolina-based firm, in part by selling more than $60 billion in assets since he took over in 2010. Moynihan said Dec. 4 he's confident Bank of America will pass the next round of U.S. stress tests, a move that could open the way for a higher dividend or share buybacks.
"Given the improvement in Bank of America's capital ratios over the past year we now believe it is highly likely that it will return capital in 2013," Richard Staite, an analyst with Atlantic Equities LLP, said in a Dec. 13 note. Excess capital will "reduce the perception of risk," making the company "our top pick among U.S. banks," he wrote.
The Federal Reserve subjects the biggest financial firms to stress tests designed to show whether they can handle a set of theoretical economic setbacks and shocks. The results can determine whether payouts increase. Bank of America's quarterly dividend has been a token 1-cent a share since March 2009.
"The question will be what to ask for and when, because we're not going to fail this," Moynihan, 53, said at an investor conference earlier this month. "It's pretty clear we've got the capital we need."
Bank of America shares beat Home Depot Inc. (HD), which gained 50 percent this year, and Walt Disney Co., which advanced 32 percent, as the best performer in the 30-company Dow Jones benchmark. In the KBW Bank Index, which features 24 of the biggest commercial lenders, Bank of America beat Regions Financial Corp. (RF)'s 64 percent rise.
The bank remains far below levels that prevailed in November 2006 before the financial crisis, when it sold for more than $55 a share and ranked as the biggest U.S. lender.
Meredith Whitney, the bank analyst who correctly predicted Citigroup Inc.'s dividend cut, yesterday upgraded her recommendation on Bank of America shares. Whitney is the CEO of Meredith Whitney Advisory Group LLC.