Why Bank of America Shares Are Up Today

The day before the Federal Reserve releases part two of its stress-test results, which will tell investors what the central bank thinks of proposed capital actions, shares in Bank of America (NYSE: BAC  ) are up -- just barely, which might say something about the stress superbank's investors are feeling in regards to said tests.

The tale of the tickers
But before we get into that, here's a quick overview of where B of A, its peers, and the market overall is shaking out so far today, as trading comes to a close:

  • B of A is up 0.17%.
  • Citigroup (NYSE: C  ) is down 0.33%. (Perhaps that bank's investors are reacting negatively to CEO Michael Corbat's decision not to ask the Fed for a dividend increase, despite doing very well on its own stress test.)
  • JPMorgan Chase (NYSE: JPM  ) is down 0.20%, perhaps as its investors are awaiting word on proposed capital actions from the Fed as well tomorrow.
  • Finally, Wells Fargo is up 0.34% today.

The market overall is essentially in the green all around, with the Dow Jones Industrial Average at dead zero, the S&P 500 up 0.08%, and the Nasdaq up 0.03%.

All stressed out
Investor stress over the stress tests is one possible cause for B of A's lackluster performance today, though there really shouldn't be any stress.

The bank did quite well, better than it did last year. For 2012's Comprehensive Capital Analysis and Review (the Fed's official name for bank stress tests), B of A had an actual Tier 1 common capital ratio of 8.7% going in and a 5.7% common ratio coming out.

This year, the superbank went into the CCAR with an actual Tier 1 common capital ratio of 11.4% and came out the other side with a common ratio of 6.8%. Not too bad for a bank still pulling itself out of financial-crisis difficulties.

Likely, B of A will ask the Fed for some sort of capital return to shareholders, as it should. Its CCAR test results put it in roughly the same class as JPMorgan and even Wells Fargo.

So stop stressing out, B of A investors, and at the very least, take solace in how well your bank did on the stress tests this year versus last year. Because in the end, a healthy bank that stays in business is the most important thing -- dividend increases and share buybacks or not.

Of course, the CCAR may have nothing or little to do with today's B of A share-price performance. Sometimes the market moves in mysterious ways, with little rhyme or reason. On that note, always remember you're in this for the long term: This is at the very heart of Foolish investing. 

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9/29/2016 4:01 PM
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