The bank sought to assure employees and investors that the company was strong in an internal memo, after Bank of America disclosed Washington-based Fannie Mae stepped up demands for refunds on soured home loans and New York-based insurer AIG sued to recover more than $10 billion in related losses.

Bank of America Chief Financial Officer Bruce Thompson told Nomura Securities International analysts that the firm won't need to raise capital to meet new international standards. The company will comply by trimming expenses, selling assets and letting some holdings run off, Thompson said, according to a Nomura note to clients today.

Bank of America could avoid raising capital by spinning off its Merrill Lynch wealth management and investment bank operations, said Joshua Rosner, an analyst at the New York-based research firm Graham Fisher & Co. Such a move could occur in a special dividend that would result in Bank of America returning to being a more focused retail bank, he said.

In a "base-case sale," the Merrill Lynch units acquired in 2009 may be worth $50 billion, said Mayo at Credit Agricole. He downgraded Bank of America yesterday to "underperform" from "outperform" because investors "can no longer rule out a capital raise."

Buy Recommendations

Keith Horowitz, an analyst at Citigroup, reiterated his buy recommendation, saying there's "significant value" in Bank of America and that it doesn't need to raise capital. Richard X. Bove, an analyst at Rochdale Securities LLC, said on Bloomberg Television the bank was "extraordinarily strong" and worth buying at depressed prices.

Merrill Lynch is "absolutely core" to Bank of America's mission of serving individuals, companies and institutional investors, Chief Financial Officer Bruce Thompson said last month in an interview. Executives have cited the sales potential of promoting products to clients among various divisions.

Moynihan's Challenge

The AIG suit is the latest legal challenge faced by Moynihan, who took over as chief executive in 2010. Last month, former investors including BlackRock Inc. sued Bank of America after opting out of a $624 million settlement tied to Countrywide, which the bank bought in 2008. Plaintiffs said the company misled shareholders about its finances and lending.

AIG contends Bank of America and businesses it took over caused more than $10 billion in losses on $28 billion in securities, according to the suit.

The bank is "aggressively taking action" to put mortgage concerns behind it and has set aside about $18 billion for expected loan repurchase costs through June 30, the bank said in the Aug. 7 internal memo. Litigation and credit reserves are also available for such costs, the bank said.