Moynihan: Suspended dividend increase tough on investors

Bank of America Corp.’s gaffe on U.S. stress tests has meant “tough consequences” for investors, CEO Brian T. Moynihan said Wednesday as his staff and directors regrouped to figure out what went wrong.

The board has started multiple reviews of how the mistake occurred and who’s responsible while a new submission to the Federal Reserve is prepared, officials told shareholders Wednesday at the annual meeting in Charlotte, N.C. Chief Financial Officer Bruce Thompson said revisions are due by May 27, and the regulator has 75 days to respond.

Moynihan, in his fifth year atop Bank of America, has been thwarted at least twice in attempts to boost the dividend from 1 cent, where it has languished since the financial crisis. The latest rough patch came last week when plans for an increase to 5 cents and more share buybacks were suspended because of a $4 billion error in capital calculations.

The mistake at the Charlotte-based bank was “disappointing” to everyone, Moynihan told the gathering. Thompson affirmed that the revised plan will mean a lower payout for stockholders of the second-largest U.S. lender. He didn’t specify the amount and said he couldn’t predict the Fed’s reaction.

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All the 15 directors standing for election and the independent accounting firm won approval during Wednesday’s vote, the company said in a statement, without giving the tally.

The bank is still wrestling with legal claims inherited from his predecessor’s crisis-era takeovers of Countrywide Financial Corp. and Merrill Lynch & Co., and investors pressed for answers on when the last of the disputes will be resolved. Moynihan, 54, declined to give a timetable.

Dividend history

Bank of America had shown progress, improving profit last year to $11.4 billion, the highest since 2007. Investors had speculated the company would start to rebuild its quarterly dividend toward the 64 cents offered before the financial crisis.

Moynihan appeared to deliver in March when his bank won Federal Reserve approval to increase the quarterly payment to 5 cents and repurchase $4 billion in stock. Bank of America shares tumbled after the error was found, and as of yesterday the company has declined more than 5 percent in 2014. The stock climbed 34 percent last year.

His performance drew criticism from one attendee who questioned whether Moynihan deserved his pay, and praise from supporters who cited the lender’s help for struggling mortgage holders. At one point, the meeting devolved into a shouting match between two investors.

“You stand tall and proud,” one investor said in response to a dissenting shareholder. “I love you, Mr. Moynihan.” The CEO joked that only the shareholder and his own mother felt that way.

Job loss

He was also confronted by a 13-year-old girl who said her father lost his job at Bank of America after being told the firm could hire someone for less money in another nation. The company has been cutting costs and thousands of jobs to boost profitability.

“It’s one of the toughest things I have to do,” he said. The bank isn’t moving positions overseas and it’s actually repatriating jobs, he said.

The lender’s travails with the Fed didn’t change the opinion of Warren Buffett, according to comments the Berkshire Hathaway Inc. chairman made at his company’s annual meeting.

“That error they made does not bother me,” Buffett, 83, said May 3 in Omaha, Neb. “You do the best you can.”

Berkshire made a $5 billion investment in 2011 that includes preferred stock. A proposal that would gain the bank more favorable treatment from regulators on the stake won approval from shareholders at Wednesday’s meeting.

“Buffett’s right,” said Tony Plath, a finance professor at the University of North Carolina in Charlotte. “In a month, this will all blow over,” he said, calling the accounting blunder a matter of appearances rather than a real financial threat.

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