Just when we thought the banking crisis was finished, we get another jolt. The U.S. Federal Reserve denied Bank of American (BAC) permission to raise its dividend.
If you recall, Bank of America is still struggling to absorb toxic assets it acquired with its purchase of Countrywide Mortgage. It has been on a slow climb back to fiscal health. At the end of 2010 the company was still bleeding, with a net loss of $1.2 billion.
Apparently the company had projected a return to profitability in 2011, so it declared a modest dividend. But in an unusual move, the Fed denied the bank's request for an increase, according to Barrons. Now the management must go back to the drawing board and resubmit a new capital plan.
Citigroup (C) just received permission for a one penny dividend. If we look at the big banks in terms of their ability to pay dividends, we would rank Bank of America last, followed by Citigroup.
Can we infer from this that the banking crisis is not over yet?
Bank of America stock opened lower Wednesday, falling 49 cents to $13.38 at one point.