BofA's (BAC) Ratings Under Review For Upgrade By Moody's
Zacks Investment Research | Dec 06, 2018 07:19AM ET
Moody's Investors Service, a rating arm of Moody's Corporation (NYSE:C) , has placed the long-term and short-term ratings of Bank of America (NYSE:C) under review for possible upgrade. Further, the company’s outlook of Stable has been placed under review.
Also, long-term ratings of BofA’s primary banking subsidiary, Bank of America, N.A. (“BANA”), has been put under review for similar action. Notably, Moody’s affirmed the Prime-1 short-term ratings and P-1(cr) counterparty risk assessments of BANA and its rated branches.
Why the Possible Upgrade?
Moody’s had upgraded BofA’s ratings last December. Since then, the bank has made significant progress in sustaining and further improving profitability.
BofA has been constantly generating positive operating leverage driven by managing costs, higher interest rates and retail deposit growth. Lower tax rates are also supporting the bank’s profitability. Further, the company’s profits have improved, mainly driven by notable growth in consumer banking and wealth management operations. This has lowered its dependence on investment banking and capital markets businesses.
Also, BofA projects operating expenses to remain relatively stable over the next two years despite continued investments in technology upgrades and branch expansion efforts. The rating agency believes that this will further help the company sustain improved profitability.
Moreover, BofA’s conservative risk appetite compared with many of its peers has resulted in “continued greater resiliency of its performance under the Federal Reserve's stress tests.” Moody’s believes that improved profitability has also supported the company’s enhanced capital deployment actions and sustained strong capital ratios. Moody’s expects BofA to continue increasing shareholder payouts going forward (subject to regulatory approvals).
Hence, the ratings firm will be focusing on BofA’s conservative risk appetite, lowered dependence of capital markets-related businesses and stable capital ratios while reviewing its ratings. It plans to also take into consideration the company’s future capital and funding plans as well as long-term debt.
Per Moody’s, BofA’s ratings outlook could remain Stable or could be lowered in case the company suffers significant decline in profitability, there is a marked rise in risk appetite and deterioration in capital/liquidity levels.
Ratings of Other Big Banks
Recently, Moody’s placed the long-term ratings of Citigroup (NYSE:C) under review for upgrade. Notably, the rating agency affirmed all short-term ratings and counterparty risk assessments of the company. (Read more: Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.