About $17 billion of Citicorp debt has been placed under review for an upgrade by Standard & Poor's ratings group.

The agency placed the New York money-center's debt on credit watch with positive implications late Tuesday, noting its strong capitalization and a well-diversified global business portfolio.

The bond market reacted favorably to the action, with spreads on Citicorp's bonds tightening several basis points. The tighter the spread on a bond, the cheaper the bond is for the issuer.

The action came almost simultaneously with Citicorp's announcement of a $3 billion stock buyback program.

In a separate action on Wednesday, Moody's Investors Service placed $28 billion of Citicorp securities on review for possible upgrade.

Typically, equity analysts applaud stock buybacks, while debt analysts and rating agencies bemoan the drain on capital. But in this case, even the widely anticipated buyback program was not enough to dissuade S&P.

"We're not rewarding a share buyback," said Tanya S. Azarchs, a managing director at S&P. "For a number of independent reasons, we had thought of upgrading them."

Citicorp has an 8.1% Tier 1 capital - a goal chairman John Reed had attempted to reach for the past year - and S&P expressed confidence that the stock buyback won't drag that ratio below 8%.

"Our expectation is that they'll keep the Tier 1 ratio at around that level, and that this share buyback will only serve to absorb what will be a rapid pace of retained earnings over the next couple of years," said Ms. Azarchs.

In contrast, S&P has refrained from similar positive action for BankAmerica Corp., partially because of its buyback program.

"BankAmerica is being retarded in their ratings by not being able to build capital," she said, "and that's a function of their buyback program."

Although S&P is still leaning favorably towards BankAmerica, the Tier 1 capital ratio of 7.3% is below the 8% S&P looks for in the top 30 banks.

BankAmerica retains its positive outlook status, said Ms. Azarchs.

S&P promoted Citicorp to a positive credit watch status from positive outlook. The former is a shorter-term status that could result in an upgrade within the month. Positive outlook implies a rating change may occur within a year or two.

Analysts generally anticipated the move to the shorter termcredit watch status.

Analysts have noted that earnings have driven ratings changes in the past year and a half. "Since banks' asset quality and capital ratios got to all-time lows, the prospect for higher ratings hinged on the ability of banks to demonstrate a healthy pace of earnings growth," said Ethan Heisler, a fixed-income analyst at Salomon Brothers Inc..

Citicorp's earnings have come from a broadly diversified portfolio, said S&P.

"Citicorp has a unique position in the global banking marketplace," said Ms. Azarchs. "That should help them weather the storms that will affect banking a bit better."

S&P said Citicorp's earnings growth has been driven by a retail banking presence in emerging markets throughout Latin America and Asia. Thus far, the bank has not suffered from the same volatility of local banks.

"They've been operating in the emerging markets for a long time," said Ms. Azarchs, and have been able to sidestep problems of local banks by cherry-picking the market, staying away from mass market lending.

Ms. Azarchs said S&P will consider the risks in emerging markets as it attempts to resolve the ratings.

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