S&P lowers Bank of America

Standard & Poor's said it lowered its long-term counterparty credit rating on Bank of America Corp. to A+ from AA-, the long-term ratings on its subsidiaries by one notch and Bank of America's short-term ratings to A-1 from A-1+. The short-term ratings on the bank subsidiaries were affirmed at A-1+.

The ratings were removed from CreditWatch negative, where they were placed on Sept. 15 following the company's announced agreement to acquire Merrill Lynch & Co. Inc. The outlook is now negative.

Merrill Lynch's ratings (A/A-1) remain on CreditWatch with developing implications.

S&P said it believes the U.S. banking sector will continue to experience credit deterioration, banks will need to rebalance their funding profiles and macroeconomic weakness could be protracted.

The downgrade also considers the risks associated with Bank of America's pending acquisition of Merrill Lynch. In S&P's view, Merrill Lynch adds earnings volatility because Bank of America's exposure to capital market businesses has been limited, and Merrill Lynch brings incremental exposures to sizeable writedowns. In addition, Bank of America has never integrated an investment bank the size of Merrill Lynch.

On the positive side, the agency said Merrill Lynch does bring opportunities for the combined entity as the company maintains strong positions in investment banking, retail brokerage and wealth management.

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