A Fitch upgrade of Bank of America's stock is tempered by the depository's high level of non-performing loans and the potential for large numbers of mortgage repurchases due to representation and warranty issues.
The rating agency said it also is concerned about BoA's legal risk related to its acquisitions of both Merrill Lynch and Countrywide Financial Corp., both of which have large subprime "legacy" asset issues.
Fitch is anticipating BoA will receive a "large inflow of new repurchase requests" from secondary market investors as the bank continues to work through its caseload of troubled mortgages.
"Among the major U.S. banks, Fitch believes BoA is most susceptible to this risk given the scrutiny being placed on the legacy Countrywide mortgages," the rating agency said.
Fitch is concerned about the company's exposure to home equity loans, especially those with loan-to-value ratios north of 100%.
