Why Investors Should Care About Bank of America Corp's Latest Bad News

On Monday, Bank of America announced that it had suspended its recent dividend increase pending approval to reinstate it from the Federal Reserve. There’s reason to believe, however, that such approval may not be forthcoming.

Apr 30, 2014 at 3:46PM

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If there's one thing investors can rely on, it's the fact that Bank of America (NYSE:BAC) will continue to surprise shareholders with bad news. On Monday, the Charlotte-based bank suspended its recent dividend increase after uncovering an error in the way it accounted for cumulative realized losses on securities inherited via its 2009 purchase of Merrill Lynch.

The announcement sent shares tumbling. By the end of the day, they had dropped more than 6%, and settled at their lowest point in almost six months.

The issue now is whether or not Bank of America will be given reapproval by the Federal Reserve to increase its quarterly distribution for the 2014 fiscal year. In the video below, Motley Fool contributor John Maxfield draws a parallel to Citigroup (NYSE:C) to explain why he believes the central bank may decline to do so.

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John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America. 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.

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