Chase Manhattan Corp. plans to issue $600 million in preferred stock, the single largest component of an 18-month campaign to build capital.

In a shelf filing with the Securities and Exchange Commission, Chase said proceeds would be used to repay debt and for general corporate purposes.

Analysts said that if the bank issued all $600 million in preferred, its Tier I capital ratio would rise about 60 basis points from its current level to 7% - assuming other parts of the balance sheet do not change significantly.

Cornerstone of Rebuilding

At the end of 1990, the Tier 1 ratio was 4.32%, just over the regulatory minimum.

Preferred stock is the cornerstone of Chase's capital-rebuilding program, with the bank tapping that market three times in the past two years.

As a result of its efforts, Chase is a candidate to be rated "well capitalized" under new regulatory guidelines.

Given investors' strong appetite for bank securities and in light of low interest rates, Chase could pay a lower dividend on the new preferred issue than it has previously. The yield spread for Chase's preferred issues has fallen dramatically - 200 basis points in the past year. A July issue of preferred was priced at 65 basis points over comparable Treasuries.

Chase may refinance a previous issue of preferred stock. The bank has a variable-rate preferred issue that it might seek to retire and replace with a fixed-rate issue. The company has already redeemed one preferred issue, which carried a relatively high dividend yield.

The Preferred Option

Another option is to replace high-yield debt with the lower-yielding preferred. By offering to swap preferred for debt, Chase would increase its chances of winning an upgrade in its credit rating. "I see this not so much as a cost savings as a balance-sheet upgrade by moving from debt to preferred," said Raphael Soifer, an analyst with Brown Brothers Harriman & Co.

The preferred issue may also represent financing for acquisitions or to set up a special-purpose corporation for the derivatives business, say analysts.

One potential acquisition is of the Boston Co., a unit of American Express Co. Chase is said to be among several banks considering buying the securities custodian and money manager that American Express has put on the block.

Separately, Chemical Banking Corp. said Friday that on Sept. 30 it will redeem all two million shares of its series B adjustable-rate cumulative preferred stock at $50 a share. Chemical said it would save $7.5 million a year in dividend expenses at current rates.

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