Citicorp was rewarded Thursday for improving financial results with an upgrade by Moody's Investors Service.

Moody's said it boosted Citicorp's ratings because it expects that the bank's improving earnings will lead to higher capital.

The agency upgraded senior debt one notch, to Baa1 from Baa2. Subordinated debt was boosted to Baa2 from Baa3.

In addition, commercial paper was raised to Prime-2 from Prime-3, and noncumulative preferred stock was raised to Baa3 from Ba2.

Sustained Growth Seen

Moody's expects Citicorp to sustain earnings growth by substantially lowering loan losses and loan-loss provisions. Citicorp has a relatively low level of provisions - 77% at the end of the first quarter - compared with other banks, but Moody's said the bank will need lower provisions.

Citicorp earned $670 million in the first quarter, nearly equaling the $722 million earned in all of 1992. Second-quarter results are due out Tuesday.

At March 31, Tier 1 capital ratio was 5.23%, more than the regulatory minimum but by a much smaller cushion than any other major bank. Moody's expects that cushion to widen, but predicts Citicorp's capital ratios will not surpass many banks'.

Standard & Poor's Corp. rates Citicorp one notch higher than Moody's on senior and subordinated debt. Standard & Poor's rates those A-minus and BBB-plus, respectively.

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