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Investing.com -- Fitch Ratings has confirmed the ratings of Bank of America Corporation (NYSE:BAC), maintaining its Long- and Short-Term Issuer Default Ratings (IDRs) at ’AA-’ and ’F1+’, respectively, on Tuesday, June 3, 2025. The same affirmation was given to Bank of America, N.A.’s (BANA) Long- and Short-Term IDRs, which were upheld at ’AA’ and ’F1+’, respectively. The ratings agency maintained the stable outlook for the long-term IDRs.
The ratings are driven by the bank’s strong intrinsic profile, reflected in its Viability Rating (VR) of ’aa-’, which indicates the bank’s leading position in many of its core businesses. The company’s diversified business mix and consistent strategy are also seen as factors that will continue to support a more stable financial performance through economic cycles.
The ratings assessment also considered the close correlation between the parent company and its domestic banking subsidiaries, reflected in their equalized VRs. This is supported by the bank’s double leverage, which is below 120%, and its prudent management of liquidity, including the liquidity held in the intermediate holding company (IHC).
Bank of America’s business profile, which holds leading or near-leading market shares across many segments, is a significant strength in its ratings. The bank has a disciplined approach to risk management and balance sheet growth, which should result in less volatile earnings performance in a stressed environment.
After a period of normalization, the bank’s credit metrics appear to have stabilized since the third quarter of 2024. Net charge-offs declined slightly to 0.5% of loans in the first quarter of 2025, primarily due to lower commercial real estate office charge-offs.
The bank’s operating profit/risk-weighted assets (RWA) ratio improved slightly to 1.9% in the first quarter of 2025. Factors contributing to this improvement included lower funding costs, fixed-rate asset repricing, higher global markets activity, and moderate loan and deposit growth.
The bank’s CET1 ratio has been relatively stable since 2023, reaching 11.8% (standardized) in the first quarter of 2025, in line with Fitch’s expectations and above required minimum capital levels. Fitch expects this ratio to remain consistent due to the bank’s lower risk appetite relative to peers.
The bank’s strong funding flexibility and access to capital markets are also seen as strengths in its ratings. The bank’s robust domestic market share, which was further strengthened during the pandemic, translates into relatively low deposit costs.
Fitch noted several factors that could lead to a negative rating action or downgrade, including a sustained increase in its impaired loans/gross loans ratio to above 2%, or a sustained reduction in the cushion above the bank’s required minimum CET1 ratio to less than 150 basis points without a credible plan to rebuild it. Other potential negative factors include material governance deficiencies or risk management weaknesses, sustained quarterly losses in its Global Markets business, or a consistent core double leverage exceeding 120%.
Fitch does not see further ratings upside for Bank of America at its current rating level, despite expected solid performance over time, given the firm’s overall complexity.
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