BofA to return $45 billion to taxpayers

Nation's largest bank said it planned to sell $18.8 billion in securities to fund move that would free it from government restrictions.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By David Ellis, CNNMoney.com staff writer

Bailout tracker
Follow the money: Bailout tracker
The government is engaged in a far-reaching - and expensive - effort to rescue the economy. Here's how you can keep tabs on the bailouts. More

NEW YORK (CNNMoney.com) -- Bank of America said late Wednesday it planned to return the entire $45 billion in bailout money it received from the government over the past year.

The move would allow Bank of America, the nation's largest lender, to wriggle free from a variety of government restrictions it has had to abide by, including pay caps for its top executives.

It could also smooth what has been a difficult search for a new chief executive.

Outgoing CEO Ken Lewis is scheduled to depart by year end. Bank of America's board of directors originally hoped to select a successor by Thanksgiving.

"We believe that this is good news, not only for the U.S. taxpayer and our company, but for the country as it is a milestone indicating that public policy has succeeded in helping our industry and the economy begin to recover," Lewis said in a statement.

The payback would be made largely through the sale of $18.8 billion of securities that would convert into common stock, according to the company. The stock sale will be put to a shareholder vote in coming months.

In addition, the bank said it would supplement the $18.8 billion with $26.2 billion in cash.

Last fall, as the government tried to stabilize the financial markets, Bank of America received $25 billion in aid under the Troubled Asset Relief Program, or TARP.

That number grew to $45 billion in the following months as the bank sought to cover losses it absorbed through its purchase of Merrill Lynch at the height of the crisis in September 2008.

There had been speculation earlier this fall that the company was exploring options to pay back part of the money it had received from the government.

But many believed that it would be at least several more months before the Charlotte, N.C.-based lender could get completely out from under the government's thumb.

The move, of course, will save Bank of America from having to make any further dividend payments on aid it received from the government. So far this year, the company has paid out $2.54 billion to the Treasury Department.

But exiting TARP won't come without a cost. The company said it would reduce its fourth-quarter results by $4.1 billion as a result. The company is expected to report a loss of $524 million in the current quarter.

Bank of America noted however, it did not plan to exercise its right to repurchase warrants, or rights to purchase company shares, owned by the government.

Bank of America (BAC, Fortune 500) shares finished more than 1% lower in regular trading Wednesday, but jumped more than 3% on the news after the bell. To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
Want to buy -- and live in -- a piece of history? It's not that far out of reach. These historic homes are not only for sale, they are incredible bargains. More
5 ways retailers are tracking you If you think pesky salespeople are invading your personal space, check out these 5 technologies that are tracking your movements throughout a store. More
Moto X vs. Droid Turbo: Which Droid should you buy? Motorola has made the two best Android smartphones this year. Here's how they stack up. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.