Merrill Brings a Lot of Baggage to BofA

Analysts remained concerned about the prospect of further writedowns at Merrill Lynch as well BofA's capital levels, given how close it is in timing to the Countrywide deal.

Standard & Poor's lowered BofA's long-term counterparty credit rating down one notch to "AA-" from "AA" on news of the acquisition and placed the company on CreditWatch with "negative implications." Moody's Investor Service also placed the bank's long-term debt ratings on review for downgrade.

"While BofA has a history of successfully integrating bold acquisitions, the purchase of Merrill carries integration risk, particularly since it comes during a period of severe market turmoil," S&P analysts write in a note. "BofA has never integrated an investment bank the size of Merrill. Events of the past year demonstrate the high business risk of the securities industry. Moreover, management of a substantially bigger and global franchise could present challenges unknown to BofA."

In a separate note, Moody's said integration challenges include retaining Merrill customers and key personnel over the next few months while the deal is being finalized and the need to resolve cultural differences "that are frequently major obstacles to success," among other things, it says.

Richard Staite, an analyst in London at Atlantic Equities, writes that the deal makes it more likely that BofA will have to cut its dividend.

Jeff Harte, an analyst at Sandler O'Neill & Partners, is specifically cautious about management's ability to have done "sufficient due diligence" on Merrill Lynch's $966 billion balance sheet, he writes in a note.