Superb Capital Management Will Allow Bank of America to Keep Repurchasing Shares
Large banks like JPMorgan Chase and Citigroup had to pause share repurchases earlier this year in light of higher regulatory capital requirements that will come into play in 2023 and 2024. Meanwhile, Wells Fargo (NYSE: WFC) has plenty of capital but put off repurchases due to the uncertain economic outlook and market volatility. That makes Bank of America (NYSE: BAC) the only bank in its peer group that not only repurchased shares in the third quarter of the year, but also will continue to be able to do so for the remainder of the year.
The bank has gotten into this position by managing capital extremely well, despite a difficult environment. Let me explain.
Banks are required by regulators to set aside a large amount of capital to be prepared for unexpected losses should the economy suddenly take a turn for the worse. Although banks have many capital ratios they must maintain, a key one to watch is called the common equity tier 1 (CET1) capital ratio, which is a measure of a bank's core capital, expressed as a percentage of its risk-weighted assets (RWA) such as loans.
Source Fool.com
