New York, December 05, 2018 -- Moody's Investors Service ("Moody's") has placed
on review for upgrade all long-term and short-term ratings
of Bank of America Corporation (BAC, senior debt at A3, short-term
at Prime-2) as well as the long-term ratings and assessments
of its lead bank, Bank of America, N.A. (BANA,
Aa3 for deposits) and of certain other subsidiaries. Moody's also
affirmed the Prime-1 short-term ratings and P-1(cr)
counterparty risk assessments at BANA and its rated branches. A
complete list of affected ratings and entities can be found at the end
of this press release.
RATINGS RATIONALE
The review for upgrade reflects Bank of America's strengthening
profitability, especially from its non-capital markets businesses,
continued maintenance of its conservative risk appetite, and stable
capital ratios despite an increase in capital payouts.
Since Moody's last upgraded Bank of America a year ago the bank
has continued to generate consistent positive operating leverage,
aided by ongoing cost discipline, rising interest rates, and
a leading retail deposit base which has continued to exhibit low deposit
betas. This, together with a lower effective tax rate due
to US tax reform, has boosted the bank's profitability as
measured by return on tangible assets after preferred dividends to over
1.1% and above that of similarly rated peers. At
the same time, the firm has continued to maintain a more conservative
risk appetite than at many of its peers. Evidence of this includes
continued greater resiliency of its performance under the Federal Reserve's
stress tests as well as the bank's more cautious approach to loan growth
than at many of its peers and its decision to "not chase the market"
in leveraged lending.
BAC's improved profitability has occurred most notably in its consumer
banking and wealth management business segments, reducing the firm's
dependence on its investment banking and capital markets business.
The bank has indicated that operating expenses should remain essentially
flat over the next two years, even as the firm continues to make
significant additional investments in technology. This should help
sustain BAC's improved profitability while also ensuring that the
bank's strong franchises in retail and commercial banking and wealth
management remain competitive.
The improved profitability has also helped sustain the bank's regulatory
capital ratios this year, notwithstanding an increase in its payout
to shareholders and a sizeable increase in unrealized losses on investment
securities due to higher long-term interest rates. Going
forward the rating agency expects BAC will continue to increase its shareholder
payouts, subject to regulatory approval. As a result,
BAC's capital ratios could decline, although the extent of
such decline will depend upon the future rigor of Federal Reserve stress
tests.
WHAT COULD CHANGE THE RATINGS UP/DOWN
Moody's review for upgrade will focus on the sustainability of BAC's
improved profitability, the resiliency of the bank's diverse
mix of businesses to a more stressful operating environment, and
whether the bank is considering any changes to its risk appetite in light
of recent pressures in its investment banking and capital markets businesses.
The review will also consider BAC's future capital and funding plans,
including management targets for the amount of total loss absorbing capacity
and holding company long-term debt. Under Moody's
loss-given-failure (LGF) analysis a sustained reduction
in the volume of holding company debt outstanding would increase the potential
severity of loss for bondholders in the event of the bank's failure.
Any reduction in LGF uplift would offset the benefit of BAC's improved
credit profile and could lead to a confirmation of BAC's current
holding company debt ratings and BANA's subordinated and senior
unsecured debt ratings even if the bank's baseline credit assessment,
deposit ratings and counterparty risk ratings were upgraded.
Bank of America's ratings outlook may be returned to stable or the
ratings may be downgraded if the bank suffers a sustained decline in profitability,
experiences a significant deterioration in capital or liquidity levels
relative to peers and targets, exhibits a marked increase in its
risk appetite, or experiences a sizeable operational risk charge
or control failure.
The following ratings actions were taken:
On Review for Upgrade:
..Issuer: Bank of America Corporation
.... Commercial Paper, currently P-2
.... LT Issuer Rating, currently A3,
Rating Under Review; previously A3, Stable
.... Senior Unsecured Medium-Term Note
Program, currently (P)A3
.... Subordinate Medium-Term Note Program,
currently (P)Baa2
.... Other Short Term Medium-Term Note
Program, currently (P)P-2
.... Senior Unsecured Shelf, currently
(P)A3
.... Pref. Shelf Non-cumulative,
currently (P)Ba1
.... Pref. Shelf, currently (P)Baa3
.... Junior Subordinate Shelf, currently
(P)Baa3
.... Subordinate Shelf, currently (P)Baa2
.... Pref. Stock Non-cumulative,
currently Ba1 (hyb)
.... Subordinate Regular Bond/Debenture,
currently Baa2
.... Senior Subordinated Regular Bond/Debenture,
currently Baa2
.... Senior Unsecured Regular Bond/Debenture,
currently A3, Rating Under Review; previously A3, Stable
..Issuer: Bank of America, N.A.
.... Adjusted Baseline Credit Assessment,
currently baa1
.... Baseline Credit Assessment, currently
baa1
.... LT Counterparty Risk Assessment,
currently Aa3(cr)
.... LT Counterparty Risk Rating, currently
Aa3
.... LT Issuer Rating, currently Aa3,
Rating Under Review; previously Aa3, Stable
.... Subordinate Bank Note Program,
currently (P)A1
.... Senior Unsecured Bank Note Program,
currently (P)Aa3
.... Subordinate Regular Bond/Debenture,
currently A1
.... Senior Unsecured Regular Bond/Debenture,
currently Aa3, Rating Under Review; previously Aa3, Stable
.... LT Deposit Rating, currently Aa3,
Rating Under Review; previously Aa3, Stable
..Issuer: B of A Issuance B.V.
.... Senior Unsecured Regular Bond/Debenture,
currently A3, Rating Under Review; previously A3, Stable
..Issuer: BA Australia Limited
.... Senior Unsecured Medium-Term Note
Program, currently (P)Aa3
..Issuer: BAC Capital Trust XIII
.... Pref. Stock Non-cumulative,
currently Ba1 (hyb)
..Issuer: BAC Capital Trust XIV
.... Pref. Stock Non-cumulative,
currently Ba1 (hyb)
..Issuer: BAC Capital Trust XV
.... Pref. Stock, currently Baa3
(hyb)
..Issuer: Bank of America, N.A.
(Sydney Branch)
.... LT Counterparty Risk Assessment,
currently Aa3(cr)
.... LT Counterparty Risk Rating, currently
Aa3
.... Subordinate Medium-Term Note Program,
currently (P)A1
.... Senior Unsecured Medium-Term Note
Program, currently (P)Aa3
..Issuer: Bank of America, N.A.,
London Branch
.... LT Counterparty Risk Assessment,
currently Aa3(cr)
.... LT Counterparty Risk Rating, currently
Aa3
.... LT Deposit Note/CD Program, currently
(P)Aa3
..Issuer: BofA Finance LLC
.... Senior Unsecured Medium-Term Note
Program, currently (P)A3
.... Senior Unsecured Regular Bond/Debenture,
currently A3, Rating Under Review; previously A3, Stable
.... Senior Unsecured Shelf, currently
(P)A3
..Issuer: Countrywide Capital III
.... Pref. Stock, currently Baa3
(hyb)
..Issuer: LaSalle Bank N.A.
.... LT Deposit Note/CD Program, currently
Aa3, Rating Under Review; previously Aa3, Stable
..Issuer: LaSalle Funding LLC
.... Senior Unsecured Shelf, currently
(P)A3
.... Subordinate Shelf, currently (P)Baa2
.... Senior Unsecured Medium-Term Note
Program, currently (P)A3
.... Senior Unsecured Regular Bond/Debenture,
currently A3, Rating Under Review; previously A3, Stable
..Issuer: BAC Canada Finance Company
.... Subordinate Medium-Term Note Program,
currently (P)Baa2
.... Senior Unsecured Medium-Term Note
Program, currently (P)A3
.... Senior Unsecured Regular Bond/Debenture,
currently A3, Rating Under Review; previously A3, Stable
.... Senior Unsecured Shelf, currently
(P)A3
..Issuer: FleetBoston Financial Corporation
.... Subordinate Regular Bond/Debenture,
currently Baa2
..Issuer: Merrill Lynch & Co., Inc.
.... Subordinate Regular Bond/Debenture,
currently Baa2
.... Senior Unsecured Conv./Exch.
Bond/Debenture, currently A3, Rating Under Review; previously
A3, Stable
.... Senior Unsecured Regular Bond/Debenture,
currently A3, Rating Under Review; previously A3, Stable
..Issuer: Merrill Lynch Capital Trust I
....Pref. Stock, currently Baa3
(hyb)
..Issuer: Merrill Lynch Credit Reinsurance Ltd.
.... LT Issuer Rating, currently Baa1,
Rating Under Review; previously Baa1, Stable
..Issuer: Merrill Lynch International & Co.
C.V.
.... Senior Unsecured Medium-Term Note
Program, currently (P)A3
.... Other Short Term Medium-Term Note
Program, currently (P)P-2
..Issuer: Merrill Lynch Japan Finance GK
.... Senior Unsecured Medium-Term Note
Program, currently (P)A3
.... Other Short Term Medium-Term Note
Program, currently (P)P-2
..Issuer: Merrill Lynch Reinsurance Solutions Ltd.
.... LT Issuer Rating, currently Baa1,
Rating Under Review; previously Baa1, Stable
..Issuer: Merrill Lynch S.A.
.... Senior Unsecured Regular Bond/Debenture,
currently A3, Rating Under Review; previously A3, Stable
Affirmations:
..Issuer: BA Australia Limited
.... Other Short Medium-Term Note Program,
Affirmed (P)P-1
..Issuer: Bank of America, N.A.
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... ST Deposit Rating, Affirmed P-1
.... ST Bank Note Program, Affirmed
(P)P-1
.... Commercial Paper, Affirmed P-1
..Issuer: Bank of America, N.A.
(Sydney Branch)
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... Commercial Paper, Affirmed P-1
..Issuer: Bank of America, N.A.,
London Branch
.... ST Counterparty Risk Assessment,
Affirmed P-1(cr)
.... ST Counterparty Risk Rating, Affirmed
P-1
.... ST Deposit Note/CD Program, Affirmed
(P)P-1
.... Commercial Paper, Affirmed P-1
Outlook Actions:
..Issuer: B of A Issuance B.V.
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: BA Australia Limited
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: BAC Capital Trust XIII
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: BAC Capital Trust XIV
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: BAC Capital Trust XV
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: Bank of America Corporation
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Bank of America, N.A.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Bank of America, N.A.
(Sydney Branch)
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Bank of America, N.A.,
London Branch
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: BofA Finance LLC
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Countrywide Capital III
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: LaSalle Bank N.A.
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: LaSalle Funding LLC
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BAC Canada Finance Company
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: FleetBoston Financial Corporation
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: Merrill Lynch & Co., Inc.
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: Merrill Lynch Capital Trust I
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: Merrill Lynch Credit Reinsurance Ltd.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Merrill Lynch International & Co.
C.V.
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: Merrill Lynch Japan Finance GK
....Outlook, Changed To Rating Under
Review From No Outlook
..Issuer: Merrill Lynch Reinsurance Solutions Ltd.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Merrill Lynch S.A.
....Outlook, Changed To Rating Under
Review From No Outlook
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
David Fanger
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
