Bank of New York Co. recently was placed on review for upgrade by Moody's Investors Service Inc., joining the growing list of banks that the rating agency has recently upgraded or put on its watch list.
Moody's will review ratings on the A2 senior debt, the A3 subordinated debt, and the A2 preferred stock, among others, in the next several months.
The rating agency noted that Bank of New York's fundamental performance has improved consistently over the past few years, especially in the areas of asset quality and overhead control.
The rash of positive moves by the agency, including upgrades of Chemical Banking Corp. and Chase Manhattan Corp. and a positive watch for BankAmerica Corp. suggests that "they have been very much in the holiday spirit," said Jean I. Sievert, a bank bond analyst at Chase Securities Inc.
Moody's actions reflected confidence about earnings and cost-cutting benefits from mergers in the case of Chemical and Chase, and comfort with dominant and defensible market positions in the case of BankAmerica and Bank of New York.
Bank of New York's acquisitions this year have strengthened its position in several areas.
"Their acquisitions indicate that Bank of New York is continuing to drive the lower unit costs and better market reach through the addition of certain business lines that complement what they've been doing all along," said Allerton Smith, a bank analyst at Donaldson, Lufkin & Jenrette.
"The Bank of New York has solidified its positions in the securities processing and credit card businesses," said Ms. Sievert.
Analysts noted that Moody's had a long-term stable outlook on the company before it was put on watch, while its industry rival Standard & Poor's Ratings Group maintains a positive outlook.
"Moody's had a stable outlook, and S&P had a positive outlook," said Ann Robinson, a bank bond analyst at Bear, Stearns & Co. "Yet it was Moody's who did the watch-listing first."
Ms. Robinson said the lesson is that outlooks aren't necessarily indicative of future rating actions.
Others added that Moody's is a relative newcomer to ratings outlooks, and has yet to work out a formalized methodology.
In its review of Bank of New York, Moody's said it will focus on the bank's future business strategies and on its prospective competitive position in its key business lines, which include regional banking, securities processing, and credit cards.
The rating agency noted that Bank of New York's fundamental performance has improved consistently over the past few years, especially in the areas of asset quality and overhead control.
Analysts anticipated an upgrade for Bank of New York.
"They have excellent asset quality and strong fee income sources," said Michael Leit, a bank bond analyst at Prudential Securities Inc.
"They can grow without lending," said Mr. Leit.
