Fitch Affirms Bank of America's Ratings at 'A/F1'; Rating Outlook is Stable

Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) of Bank of America Corporation (BAC) at 'A/F1' and the Viability Rating (VR) at 'bbb+'. The Rating Outlook is Stable. This action is in tandem with Fitch's broad assessment of the largest global banking institutions. A complete list of ratings follows at the end of this release.

Today's rating action on BAC was taken today in conjunction with Fitch's Global Trading and Universal Bank (GTUB) periodic review. Fitch's outlook for the industry is stable on balance. The positive rating drivers include improved liquidity, funding, capitalization and more streamlined businesses, all partly driven by regulation. Offsetting these positive drivers are substantial earnings pressure, regulatory uncertainty and heightened legal and operational risk.

RATING ACTION RATIONALE

BAC's VR continues to be weighed down by its sizeable litigation risks. This was particularly noteworthy in 2Q'12 when BAC had an increase in outstanding representation and warranty claims of $6.6 billion related to legacy assets sold to GSE's, third parties, and those wrapped by monoline insurers.

Fitch notes, however, that BAC's efforts to improve its capital position provides an increased buffer to absorb potential litigation and loss reserving costs noted above. BAC's Tier 1 common ratio increased to 11.24% at 2Q'12, up from 10.78% at 1Q'12, and 8.23% in the year-ago period of 2Q'11.

Additionally, BAC's Basel 3 capital ratios, not including the U.S. NPR, would have been approximately 8.10% at the end of 2Q'12. This improvement has been better than Fitch's expectations, and was realized through a mix of asset sales and efforts to optimize the company's mix of risk-weighted assets. Furthermore, this improved capital position supports BAC's Stable Rating Outlook.

Fitch believes that the litigation risk and reserving risks noted above will continue to weigh on BAC's overall earnings profile over the near-to-intermediate term time horizon, which is also consistent with the company's current results. In each of the last two quarters BAC's pre-tax profits as calculated by Fitch, which exclude DVA adjustments and various other gains/charges, equated to a 0.5% return on assets (ROA), below that of both other G-SIFI as well as other more regionally focused large banks.

While Fitch acknowledges that BAC is continuing to opportunistically retire high cost debt, thereby also improving its funding profile, and also is engaging in significant cost reduction initiatives, future earnings growth will be more significantly predicated on reducing litigation costs as well as winning new business. Fitch expects the former to weigh on earnings for several quarters to come, and expects that latter to be very challenging given subdued economic growth and an elevated competitive environment.

RATING DRIVERS & SENSITIVITIES - VR, IDRs & Senior Debt

Given BAC's improved capital and liquidity position, Fitch believes that positive momentum for the VR would require a meaningful reduction in litigation risks as well as an extended period of both improving and consistent earnings generation. Fitch would note that earnings have been and could continue to be somewhat volatile given BAC's large reliance on capital markets revenue. Capital markets revenue is primarily from BAC's global banking business and global markets business revenue, which combined equate to nearly one-third of the company's overall revenue. Fitch expects that, over time, capital markets' contribution to the company's overall revenue could modestly decline.

Fitch notes that BAC's VR could be downgraded if litigation-related or other charges result in significant net earnings losses in excess of what Fitch's stress scenarios already anticipate or alternatively cause capital ratios to meaningfully decline. In addition, while current credit quality trends have been somewhat favorable, a reversal of this trend could negatively impact BAC's VR.

RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

BAC's current 'A' Long-term IDR is above its 'bbb+'VR, reflecting the fact that BAC's IDR benefits from support. BAC's '1' Support Rating and 'A' Support Rating Floor factor in government support in the event of need for BAC and other U.S. G-SIFIs. At BAC's current VR, the firm's Long-term IDR would be affected by a change in the Support Rating Floor.

Fitch's rating action continues to embody a view of support in the IDRs of BAC and other U.S. Global Systemically Important Financial Institutions (G-SIFIs) over the near-to-intermediate term. This viewpoint was broadly discussed in Fitch's special report titled 'U.S. Banks - Sovereign Support: When Does it End' dated Dec. 15, 2011. Fitch could reassess its support ratings for U.S. G-SIFIs if global market conditions normalize and resolution regimes become more harmonized across international jurisdictions. While Fitch believes the policy goal is to no longer provide full support to systemically important banks, this is progressing at an uneven pace globally.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

Subordinated debt and other hybrid capital issued by BAC and by various issuing vehicles are all notched down from BAC's or its bank subsidiaries' VRs in accordance with Fitch's assessment of each instrument's respective nonperformance and relative loss severity risk profiles. Their ratings are primarily sensitive to any change in the VRs of BAC or its bank subsidiaries.

HOLDING COMPANY RATING DRIVERS AND SENSITIVITIES

BAC's IDR and VR are equalized with those of its operating companies and banks, reflecting its role as the bank holding company, which is mandated in the U.S. to act as a source of strength for its bank subsidiaries. It has modest double leverage of 103% at 2Q'12.

SUBSIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIES

The IDRs and VRs of BAC's bank subsidiaries benefit from the cross-guarantee mechanism in the U.S. under FIRREA and therefore IDRs and VRs of Bank of America, N.A., Bank of America Georgia, Bank of America Rhode Island, N.A., FIA Card Services N.A., LaSalle Bank N.A., United States Trust Company N.A., are equalized across the group. Fitch regards BAC's investment banking and broker-dealer entities such as Merrill Lynch & Co. Inc. and related entities and Bank of America Securities Ltd. to be core business for BAC and thus IDRs equalized and linked to BAC. Fitch views BAC's MBNA Europe Bank Ltd. subsidiary's ratings to also be a core business for BAC and thus IDRs are equalized and linked to BAC.

Fitch would further note that the ratings for Merrill Lynch International Bank Ltd., located in Ireland, could have some additional sensitivity to any potential changes in the sovereign rating of Ireland.

BAC is one of the largest U.S. banks in terms of total deposits, loans, branches, mortgage originations/servicing and credit card issuance. Following its January 2009 merger with Merrill Lynch & Co., Inc., BAC became one of the top financial institutions in wealth management and investment banking.

Fitch has affirmed the following ratings:

Bank of America Corporation

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Long-term subordinated debt at 'BBB';

--Long-term market linked securities at 'A emr';

--Short-term IDR at 'F1';

--Short-term debt at 'F1';

--Viability Rating at 'bbb+';

--Preferred stock at 'BB-';

--Support at '1';

--Support floor at 'A'.

Bank of America N.A.

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Long-term market linked deposits at'A+emr';

--Long-term subordinated debt 'BBB';

--Senior Unsecured Debt FDIC guaranteed under TLGP at 'AAA';

--Short-term IDR at 'F1';

--Short-term debt at 'F1';

--Long-term deposits at 'A+';

--Short-term deposits at 'F1';

--Viability Rating at 'bbb+';

--Support at '1';

--Support floor at 'A'.

Bank of America Georgia, N.A.

Bank of America Oregon, National Association

Bank of America California, National Association

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Viability Rating at 'bbb+';

--Support at '1';

--Support floor at 'A'.

Bank of America Rhode Island, National Association

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Long-term deposits at 'A+';

--Short-term deposits at 'F1';

--Viability Rating at 'bbb+';

--Support at '1';

--Support floor at 'A'.

FIA Card Services N.A.

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Long-term deposits at 'A+';

--Short-term deposits at 'F1';

--Short-term debt at 'F1';

--Long-term senior debt at 'A';

--Long-term subordinated debt at 'BBB';

--Viability Rating at 'bbb+';

--Support at '1';

--Support floor at 'A'.

LaSalle Bank Corporation

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Viability Rating at 'bbb+';

--Support at '1';

--Support floor at 'A'.

Merrill Lynch & Co., Inc.

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Long-term market linked notes at 'A emr';

--Long-term subordinated debt at 'BBB';

--Short-term IDR at 'F1';

--Short-term debt at 'F1';

--Viability Rating at 'bbb+';

--Support at '1';

--Support floor at 'A'.

Merrill Lynch, Pierce, Fenner & Smith, Inc.

--Long-term IDR at 'A';

--Short-term IDR at 'F1'.

Banc of America Securities Limited

--Long-term IDR at 'A';

--Short-term IDR at 'F1'.

B of A Issuance B.V.

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Long-term subordinated debt at 'BBB';

--Support at '1'.

LaSalle Bank N.A.

LaSalle Bank Midwest N.A.

--Long-term deposits at 'A+';

--Short-term deposits at 'F1';

--Long-term market linked deposits at 'A+ emr'.

United States Trust Company N.A.

Countrywide Bank FSB

--Long-term deposits at 'A+';

--Short-term deposits at 'F1';

MBNA Canada Bank

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Long-term subordinated debt at 'BBB';

--Short-term IDR at 'F1'.

MBNA Europe Bank Ltd.

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Short-term IDR at 'F1'

--Support at '1'.

Merrill Lynch International Bank Ltd.

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Support at '1'.

Merrill Lynch S.A.

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Long-term market linked securities at 'A emr'

--Support at '1'.

Merrill Lynch & Co., Canada Ltd.

--Short-term IDR at 'F1';

--Short-term debt at 'F1'.

BAC Canada Finance

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Long-term market linked securities at 'A emr';

--Short-term IDR at 'F1';

--Support at '1'.

Merrill Lynch Japan Finance Co., Ltd.

--Long-term IDR at 'A';

--Long-term senior debt at 'A';

--Short-term IDR at 'F1';

--Short-term debt at 'F1';

--Support at '1'.

Merrill Lynch Japan Securities Co., Ltd.

--Long-term IDR at 'A';

--Short-term IDR at 'F1';

--Support at '1'.

Merrill Lynch Finance (Australia) Pty LTD

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

BankAmerica Corporation

--Long-term senior debt at 'A';

--Long-term subordinated debt at 'BBB'

Countrywide Financial Corp.

--Long-term senior debt at 'A';

--Long-term subordinated debt at 'BBB'.

Countrywide Home Loans, Inc.

--Long-term senior debt at 'A';

--Long-term senior shelf unsecured rating at 'A';

FleetBoston Financial Corp

--Long-term subordinated debt at 'BBB'.

LaSalle Funding LLC

--Long-term senior debt at 'A';

MBNA Corp.

--Long-term senior debt at 'A';

--Long-term subordinated debt at 'BBB';

--Short-term debt at 'F1'.

NationsBank Corp

--Long-term senior debt at 'A';

--Long-term subordinated debt at 'BBB'.

NCNB, Inc.

--Long-term subordinated debt at 'BBB'.

BAC Capital Trust I - VIII

BAC Capital Trust XI - XV

--Trust preferred securities at 'BB'.

BAC AAH Capital Funding LLC I - VII

BAC AAH Capital Funding LLC IX - XIII

BAC LB Capital Funding Trust I - II

--Trust preferred securities at 'BB'.

BankAmerica Capital III

BankAmerica Institutional Capital A, B

BankBoston Capital Trust III-IV

Barnett Capital Trust III

Countrywide Capital III, IV, V

MBNA Capital B

NB Capital Trust II, III

--Trust preferred securities at 'BB'.

Merrill Lynch Preferred Capital Trust III, IV, and V

Merrill Lynch Capital Trust I, II and III

--Trust preferred securities at 'BB'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);

--'Securities Firms Criteria' (Aug. 15, 2012);

--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);

--'Treatment of Hybrids in Bank Capital Analysis' (July 09, 2012);

--'U.S. Banks - Sovereign Support - When Does it End' (Dec. 15, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Securities Firms Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686137

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Treatment of Hybrids in Bank Capital Analysis

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682453

U.S. Banks - Sovereign Support: When Does it End -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=662250

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