BofA Predicts $800 Million Pretax Charge on TruPS Redemption

• April 30 2018
• Laura J Keller

Bank of America Corp. expects to book an $800 million pretax charge in the second quarter as it redeems $3.5 billion of trust preferred securities.

Bank of America Corp. expects to book an $800 million pretax charge in the second quarter as it redeems $3.5 billion of trust preferred securities.

Trust preferred securities are equity-like debt instruments that pay interest like bonds. Banks favored issuing them during the financial crisis because they were treated like equity, and not debt, for regulatory purposes. The redemption will occur on June 6, Bank of America said Monday in a statement.

The firm had $4.73 billion in TruPS outstanding at the end of 2017, according to a regulatory filing. Shares of the Charlotte, North Carolina-based company were little changed at $29.94 in extended trading in New York as of 5:20 p.m.

Banks have been redeeming outstanding TruPS after the instruments lost preferential regulatory treatment. Bank of America also booked a $612 million charge in 2015 as it redeemed TruPS related to its purchase of Merrill Lynch six years earlier. Morgan Stanley in 2016 won regulatory approval to redeem all of its trust preferreds.

“Bank of America has received all necessary approvals for these redemptions,” the company said Monday.