Bank of America Corp (NYSE:BAC) became the latest 'big' US bank to signal an increase in its dividend after passing the Federal Reserve's stress tests.
The Charlotte, North Carolina-based lender plans to raise its quarterly dividend by 9.1% to US$0.24 per share from US$0.22, starting from the third quarter of this year.
The move follows the release late last week of the US Federal Reserve's stress test of the ability of major US banks to withstand a major financial crisis.
All 23 banks, including Bank of America, passed the test.
Since then, peers JP Morgan Chase & Co, Wells Fargo & Co and Morgan Stanley (NYSE:MS) all have announced dividend hikes or share buybacks.
On Monday, the bank said it had initiated a dialogue with the Federal Reserve to understand differences between the Federal Reserve’s stress tests and its own stress test results. Those discussions are ongoing, Bank of America said in a statement.
This year's Fed stress test included a severe global recession with a 40% decline in commercial real estate prices, a substantial increase in office vacancies, and a 38% decline in house prices.
It assumed the unemployment rate rises by 6.4 percentage points to a peak of 10% and economic output declines commensurately.