Bank of America Corp. (BAC) shareholders on Tuesday approved the company’s intention to lift its number of common shares to 11.3 billion from 10 billion. The bank felt it necessary to increase its outstanding share-count to issue new stock to raise capital for the purpose of paying back its TARP loan.
 
With an intention to raise the number of common shares, BofA called a special meeting after paying back its TARP loan in full. In Dec 2009, BofA repaid the entire $45 billion of bailout money it had received from the government for its participation in the Troubled Asset Relief Program (TARP) during the height of the credit crisis. Out of the total 80% votes of the shareholders, the proposal was approved by 76%.
 
The repayment of TARP money followed BofA’s sale of $19.29 billion worth of common equivalent securities that would convert into common stock. BofA funded the repayment using a combination of cash from its corporate fund and sale of securities.
 
Initially, BofA received $25 billion as part of the bailout. Then the bank received an additional $20 billion in Jan 2009 after its acquisition of Merrill Lynch, which had billions of dollars in losses not anticipated by BofA.
 
Shareholders at the meeting criticized BofA on a number of issues including repaying the bailout with funds from the offering and executive bonuses.
 
BofA’s fourth quarter 2009 loss came in at 60 cents per share, a nickel worse than the Zacks Consensus Estimate of a loss of 55 cents. This compares unfavorably with the loss of 48 cents in the prior-year quarter.
 
The market turmoil was more harmful to BofA than to its peers. However, the company has concluded its biggest acquisitions. BofA acquired Merrill Lynch almost during the height of the financial crisis last year. It also acquired Countrywide Financial Corporation in Jul 2008. The CEO views these deals as beneficial for stakeholders of the company. Furthermore, this will allow the bank to focus on rebuilding customer relationships.
 
Finally, differences of opinion with regulators and lawmakers over Merrill’s 2008 bonus payments issues amid escalating losses will end with the recent $150 million settlement between the Securities and Exchange Commission (SEC) and BofA to conclude the civil allegation on BofA for misleading its shareholders in its purchase of Merrill Lynch & Co. last year.
 

Read the full analyst report on “BAC”
Zacks Investment Research