Moody's Investors Service said Thursday it may upgrade

Bank of America's

(BAC) - Get Report

debt ratings, citing a strong outlook for the company's capital position.

BofA is required to raise nearly $34 billion in new capital as a result of the government's stress test findings. A good deal of that money will likely come from its announced offering of 1.25 billion shares of common stock, which will occur in several deals over time at market prices. Its shares have traded in a range of $10.61 to $15.07 over the past week.

Bank of America also sold $7.3 billion worth of its stake in China Construction Bank this week.

As a result, Moody's said it is reviewing the financial strength ratings of BofA's subsidiaries. It also changed the outlook on BofA's non-cumulative preferred securities to developing from negative, and on its junior subordinated trust preferred securities to stable from negative. All other investment-grade ratings, on senior unsecured debt at A2 and bank deposits at Aa3, were affirmed with a stable outlook.

The outlook for Bank of America B3 preferred stock and trust preferred securities was raised to developing from negative. Outlooks on junior subordinated-backed trust preferred securities, rated Baa3, and Hybrid Income Trust Securities (HITS), rated Ba3, were upgraded to stable from negative.

Debt that is guaranteed by the Federal Deposit Insurance Corp. is still rated Triple-A with a stable outlook.

"

BofA's capital raising initiatives, if successful, should strengthen

its capital position without impairing

its franchise or future earnings power," said Moody's Senior Vice President David Fanger.

Fanger added that the risk of a dividend reduction has been lessened, and that stronger tangible common equity ratios will reduce the company's reliance on the government for additional support. BofA said last week that it is renegotiating terms on new issuances to avoid using FDIC guarantees, in an effort to become more financially independent from the government.

The ratings agency did note, however, that better capital position does not eliminate all risk, as Bank of America works through the remainder of the recession while integrating Merrill Lynch. Moody's does not expect the firm to generate "sizable earnings" until the second half of 2010, at the earliest, Fanger said.