Shares of the nation's second largest bank by assets, Bank of America (NYSE:BAC), are lower today as investors digest the results of last week's stress tests and anticipate whether or not the lender will be given approval this Thursday to increase its dividend payout and/or initiate a stock buyback program. With roughly two hours left in the trading session, B of A's shares are down by $0.14, or 1.15%.

There's really no getting around it, B of A's performance in last week's stress tests was a mixed bag. On the one hand, the results confirmed that the bank has made considerable progress when it comes to capital. As you can see in the chart below, its pre-test Tier 1 common capital ratio increased from 8.7% last year to 11.4% this year. And its analogous post-test ratio went from 5.7% up to 6.8% -- both of which comfortably exceed the requisite 5% rate.


When you translate this into dollar figures, the progress becomes even more apparent. Prior to this year's stress test, as I illustrated in a chart here, B of A had $73 billion in excess Tier 1 common capital. But even after being subjected to the test's severely adverse economic scenario, it still had $21 billion more capital than called for. Going into last year's test, meanwhile, it had $50 billion in excess capital, which fell to $10 billion after being subjected to the Fed's hypothetical assumptions. Thus, on a dollar-for-dollar basis, B of A more than doubled its excess capital base under the stressed scenario.

On the other hand, B of A didn't fare as well in terms of profitability. Under the stressed scenario, the bank's projected net loss came in at $51.8 billion for the nine quarters spanning the fourth quarter of 2012 through the fourth quarter of 2014. This made it far and away the worst performer on this front. JPMorgan Chase (NYSE:JPM) was next with a projected loss of $32.3 billion, and Citigroup (NYSE:C) was third with a loss of $28.6 billion. B of A's hypothetical loss, in other words, was horrendous on both an absolute and relative basis.

Going forward, as I noted above, the big question is whether the Federal Reserve will allow B of A to return more capital to shareholders. Prior to the financial crisis, the bank paid out more than $2 a share in dividends. Since then, however, that figure has dropped to just $0.01 each quarter. In addition, B of A's CEO Brian Moynihan has made it clear that one of his primary objectives is to rectify this situation. According to an excellent biographical sketch of the reticent executive in Fortune, "When B of A has built up a sufficient capital cushion, probably two to three years from now, Moynihan plans to return all earnings to investors in dividends or share buybacks -- we're talking about $25 billion a year, all stuffing shareholders' pockets."

Last year, the bank didn't even seek approval for an increased capital distribution. Its decision not to do so stemmed presumably from having its 2011 request humiliatingly denied. The incident made Moynihan seem out-of-touch with reality and seemingly led to the ouster of B of A's then chief financial officer, Chuck Noski. "It happened because we hadn't fully integrated the risk systems of Merrill Lynch and B of A," he told Fortune's Shawn Tully four months later.

Will it be able to take a step in this direction on Thursday? I believe it will for the simple reason that it now has more than enough capital to justify such a move, and it's made significant progress in cleaning up its legal liability -- though much on the latter front still remains as I discussed in this comprehensive analysis of B of A's legal woes. For the time being, however, as we can see in B of A's shares today, there's bound to be considerable speculation among investors and traders.

John Maxfield owns shares of Bank of America. The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.