Terms of the nearly
BAC's Long-term IDR is driven by Fitch's view that there remains an extremely high probability of support from the U.S. government if required. The Negative Outlook reflects the agency's expectation that this probability is likely to decline within one to two years given the Dodd Frank Act and progress regulators have made on implementing the
This settlement combined with BAC's other mortgage related settlements, litigation costs, and charges over the last several years pushes BAC's overall consideration in these various legal matters to the higher end of some of Fitch's internal estimates of total mortgage and legal related exposure that were compiled in the 2009/2010 time frame. Depending on what expenses, charges, and/or settlements are included in BAC's overall litigation costs, the cumulative total costs and losses related to litigation and losses is likely north of
To the extent that other unforeseen or incremental large settlements or litigation costs arise such that they continue to absorb earnings generation and/or constrain capital accumulation, there could be negative pressure on the company's
Alternatively, to the extent that this settlement with the DOJ largely resolves much of BAC's legacy exposures and on-going litigation, and allows management to focus more of its efforts on running and improving BAC's core businesses, this could have longer-term positive rating implications.
As stated in prior rating commentary, these implications would be predicated on management's ability to execute on continued efficiency initiatives without the overhang of persistent settlements and litigation costs and to drive new business across the franchise. This should drive better earnings performance, and combined with higher short-term interest rates at some point thereby allow for the incremental build of retained earnings to continue to enhance the company's capital position over a longer-term time horizon.
Additional information is available at www.fitchratings.com.
--'Global Financial Institutions Rating Criteria' (
--'U.S. Bank HoldCos & OpCos: Evolving Risk Profiles' (
--'Peer Review: Global Trading and Universal Banks (
--'Fitch Affirms Bank of America's IDR at 'A'; Outlook Revised to Negative on Support Expectations' (
Global Financial Institutions Rating Criteria
U.S. Bank HoldCos & OpCos: Evolving Risk Profiles
Peer Review: Global Trading and Universal Banks
Source: Fitch Ratings
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