Bank of America mulls swapping preferred stock for new shares

BANK of America, the second-biggest US bank, said it was considering swapping preferred stock for common shares or senior debt yesterday to cut its expenses and boost earnings.

BofA said market instability linked to the Eurozone had reduced the value of its preferred stock, which has a higher claim on its assets and earnings and pays holders a dividend.

It said it could potentially also exchange some junior debt for shares or senior debt, but would not issue more than 400m new common shares or $3bn (£1.9bn) in senior bonds.

“These transactions would increase Tier 1 common capital and, on an after-tax basis, reduce the combined level of interest expense and dividends paid on the combined junior subordinated debt and preferred stock,” its third-quarter report said.