Fitch Ratings raised its junk-level preferred stock rating on Bank of America Corp., citing improvement in the Charlotte bank's risk profile.

The ratings agency said there was less potential for additional government support or needing to omit dividends on preferred stock. The nation's largest bank by assets was successful in tapping the equity markets in the second quarter for billions in capital and has accessed the external debt markets a number of times since June. Bank of America has also converted a considerable portion of preferred stock held by non-governmental investors to common shares through voluntary exchange offers.

Still, challenges remain as the company searches for a successor to embattled Chief Executive Ken Lewis, who announced in September he will retire at year end. The choice to replace Lewis may influence the company's overall future strategy and business model.

Earnings, meanwhile, remain under pressure and asset quality problems are severe, with loan loss provisions remaining high. Bank of America posted a loss in the third quarter on $2.6 billion of write-downs, although revenue soared on its acquisition of Merrill Lynch.

Fitch noted a recent slower rate of deterioration in problem assets Tuesday, and management has stated its intention to repurchase the $45 billion of preferred stock held by the government. Fitch expects the company will use a combination of cash on hand and external financing for any near-term repayment of the investment.

Fitch raised its preferred stock rating by two notches to BB-, or three notches into junk. At the same time, it placed a number or ratings on watch for upgrade.

Shares were recently down 15 cents to $16.14.

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