Ratings agencies took the following actions last week.
Keycorp, Society Corp.: Moody's Investors Service is reviewing the long-term ratings of both these banks as well as their bank subsidiaries for a possible upgrade, following the announcement of their merger.
Keycorp's long-term debt is rated A2; Society's is rated A3.
Moody's noted that the merger, which is slated to close early in 1994, will create one of the largest banking franchises in the United States. Moody's said the deal presents both significant opportunities and some limitations for the two companies, which have some complementary strengths.
On the plus side, the merged company would have considerable geographic diversity in its loan portfolio. In addition, it would have sizable scale in some national businesses, such as mortgage servicing.
On the downside, the merger won't lead to sizable expense savings. Trends in profits and asset qualities at both banks have been positive.
The ratings company said the review will focus on the management structure and control processes for the merged company, as well as the extent of the portfolio benefits, cost efficiencies, and revenues opportunities.
Duff & Phelps reaffirmed the A-plus rating of Society as well as the ratings of its lead bank. But Duff & Phelps is reviewing the ratings of Keycorp with an eye toward a possible upgrade. The ratings agency said that the merged company will have better capital ratios and lower double leverage. And the merger addresses a critical uncertainty about who will succeed Keycorp chairman Victor J. Riley Jr.
Keycorp has demonstrated its ability to manage a geographically diverse franchise, which can be incorporated into the new banking company's operating strategy, said Duff & Phelps.
But Duff & Phelps has some reservations about the merger. Primarily, the ratings company expressed a "continuing uncertainty" that stems from the early indication by management of plans for aggressive acquisition and geographic expansion.
Chemical Banking Corp.: Fitch Investors Service Inc. raised the long-term and short-term certificates of deposit and letters of credit of Chemical Bank and Texas Commerce Bank to A-plus/F-1 from A/F-1.
In addition, Fitch boosted its rating of the credit trend of Chemical Banking Corp. to "improving," from "stable."
Fitch affirmed its "A" rating on Chemical's senior debt.
Chemical has emerged as a revitalized, more clearly focused company following its first year of combined operations with the former Manufacturers Hanover Corp., said Fitch.
Integra Financial Corp.: Moody's Investors Service raised the subordinated debt ratings of this Pittsburgh banking company to Baa2 from Baa3.
In addition, Moody's has rated the banking units A2/Prime-1, citing their good market positions, solid capitalizations. and good asset quality.
Moody's noted improving asset quality and profitability at the bank, a well as the improvement of core profitability.
