Ratings agencies had only good news for banks last week.
Six banks were upgraded, including Banc One Corp., Citicorp, and Wells Fargo & Co. and two others were put on watch for upgrade in the near future. No banks were downgraded.
Both low-rated and high-rated banks received, or were put on watch for, upgrades -- an indication of the institutions' improving strength as well as the rating agencies' brighter view of the industry.
For example, Thomson BankWatch raised Norwest Corp.'s senior rating to AA-plus, only one notch below its highest possible rating, AAA.
Moody's Investors Service raised Banc One's senior ratings to Aa3 from A. Moody's had not raised a bank into the Aa category for many years.
The agency said the upgrade reflects its generally more optimistic view of the banking industry, as well as the fortunes of Banc One itself.
Also notable was Moody's upgrade of Wells Fargo senior debt to A3 in the midst of a very weak California economy. And two banks with weaker ratings, Bank of Boston Corp. and BayBanks Inc., received upgrades.
For Bank of Boston, the upgrade from Standard & Poor's Corp. brought its preferred stock rating to an investment grade, BBB-minus, from a junk rating, BB-plus. The preferred stock previously was the banking company's only obligation rated below investment grade. BayBanks' senior debt was raised two notches by Moody's, from a junk-rated Ba1 to Baa2.
Moody's also put Midlantic Corp.'s ratings on watch for upgrade. This raises the possibility that the company's junk-rated senior debt, currently Ba2, and some subsidiaries' obligations could become investment grade.
Bank One Corp.: Moody's upgraded Banc One's senior longterm debt ratings to Aa3 from A1, and raised the long-term deposits of its bank subsidiaries to Aa2 from Aa3.
Moody's said the upgrades reflect the company's strong position in a number of regional markets, its consistently strong profitability and asset quality, and its superior capitalization -- as well as a successful acquisition program that has led to increased diversification of the company's credit portfolio and revenue base.
Standard & Poor's affirmed its AA-minus senior debt rating for Banc One, saying the bank's planned purchase of Liberty National Bancorp of Louisville, Ky., will not affect its credit quality. The agency put Liberty National's senior debt rating of A-minus on watch for possible upgrade to Banc One's level.
If the acquisition is consummated, Moody's expects Liberty's rating to rise to the level of other Banc One subsidiaries, which currently are rated AA3.
Bank of Boston Corp.: Standard & Poor's raised its ratings on Bank of Boston senior debt to BBB-plus from BBB; subordinated debt to BBB from BBB-minus; and preferred stock to an investment grade BBB-minus from a junk BB-plus.
S&P also raised the ratings on the long-term certificates of deposit and letter of credit-backed issues of Bank of Boston's subsidiary bank, the First National Bank of Boston, to A-minus from BBB-plus and subordinated debt to BBB-plus from BBB.
Standard & Poor's said, "Bank of Boston has shown steadily improving asset quality, which is now in line with similarly rated peers, notwithstanding some nominal acquisition-related increases in nonperforming assets."
BayBanks Inc.: Moody's raised the long-term ratings of BayBanks as well as the long-term and short-term ratings of its subsidiary, BayBank. The parent company's senior debt rating was raised to an investment grade Baa2 from a junk rating of Ba1, and the subsidiary bank's long-term deposit rating was raised to A3 from Baa2.
Citicorp: Thomson BankWatch raised the senior debt rating of Citicorp to A from BBB-plus, and subordinated debt to A- from BBB. Thomson cited the bank's actions of building capital levels and reducing operating expenses while maintaining the strengnth of its franchise. In addiiton, the agency cited Citicorp's declining credit costs and nonperforming asset levels in issuing the upgrade.
Thomson said "In raising the long-term ratings of Citicorp, we believe that the company's tremendous diversification, combined with the financial improvements which have been made over the past three years and management's more conservative philosophy with respect to capital and reserves, will provide it with the foundation to compete effectively with its peers worldwide."
Continental Bank: Standard & Poor's affirmed its ratings on Continental Bank Corp. as follows: BBB-minus senior debt and BB-plus subordinated debt, BB preferred stock, and A3 commercial paper. At the same time, S&P revised its outlook to positive from stable.
Standard & Poor's said, "The outlook revision reflects Continental's ongoing efforts to reduce the risk profile of its loan portfolio and improve capitalization.
The company has significantly cut its exposure to those high risk lending sectors, namely commercial real estate, highly leveraged transactions, and lesser developed countries, largely responsible for its poor asset quality during the past few years.
Midlantic: Moody's placed under reveiw for possible upgrade the long-term debt issued by Midlantic Corp. and Midlantic Banks, Inc., affecting $440 million of long-term debt.
At the same time, Moody's placed under review for possible upgrade the ratings of Midlantic Corp.'s banking subsidiaries for long- and short-term deposits and for other obligations.
Moody's stated that the review will focus on the prospects of Midlantic strengthening its retail and commercial franchise in local markets while continuing to improve its asset quality and capital positions.
The following ratings are under review for possible upgrade: Midlantic Corp., senior debt at Ba2 and subordinated debt at B1; Midlantic Banks Inc., subordinated debt at B1, and various other obligations of other subsidiaries.
Wells Fargo: Moody's upgraded the long-term senior debt of Wells Fargo & Co. to A3 from Baa1 and long-term subordinated debt to Baa1 from Baa2.
The rating of the preferred stock was raised to A3 from Baa1, and the rating of Wells Fargo Bank for long-term deposits was upgraded to A1 from A2.
Moody's said the upgrades reflect its expectation that Wells Fargo will further reduce its portfolio of impaired loans, despite continued economic softness in California.
