Moody's Investors Service said Friday it might upgrade First Bank System Inc.

"The review will focus on the company's improved asset quality and the likely further development of its retail franchise - especially its substantial core-deposit base," Moody's said.

Under review are the Minneapolis company's A3 senior debt, Baal subordinated debt and preferred stock, and Prime-2 commercial paper.

Earlier in the week, Standard & Poor's Corp. raised senior debt to A from A-minus, subordinated debt to A-minus from BBB-plus, and preferred stock to BBB-plus from BBB. The outlook was revised to stable from positive.

The agency said the upgrade reflected the Minneapolis company's successful acquisition strategy and strong capital levels.

The rating agencies took the following other actions last week:

Asaki Bank: Moody's Investors Service downgraded this Japanese bank, citing deterioration in asset quality. Senior debt, long-term deposits, and long-term letters of credit were cut to A2 from Al.

Subordinated debt was lowered to A3 from A2, and short-term deposits were dropped to Prime-2 from Prime-1.

"The bank's exposures to distressed real estate and nonbank borrowers (including its own nonbank affiliates) remain high in relation to its capital," Moody's said. Asahi Bank, based in Tokyo, has $245 billion of assets.

Bank of Hawaii: Moody's assigned Aa3 and Prime-1 ratings to the company's new bank note program. It said the ratings reflected good earnings and asset quality and the bank's dominant market position. Moody's noted that Bank of Hawaii is active in most sectors of Hawaii's economy, which depends on tourism and construction.

"Such concentration is seen as a risk factor," Moody's said. But the agency added that the bank's real estate exposure is confined to moderately priced residences and to smaller and diversified commercial developments.

Barnett Banks Inc.: Citing the company's improved asset quality and earnings, Moody's upgraded senior and subordinated debt and preferred stock. Senior debt was raised to A3 from Baa 1 and subordinated debt and preferred stock to Baa 1 from Baa2. Subsidiary bank ratings were affirmed at A2.

"The company has worked through its previous poor asset quality in Florida, resulting in significantly reduced provisions," Moody's said.

BayBanks Inc.: IBCA Ltd. upgraded long-term debt to BBB-plus from BBB and short-term debt to A2 from A3. Long-term debt of the lead bank, BayBank, was increased to A-minus from BBB-plus.

"In light of BayBanks' continued progress, particularly with respect to capital and operating earnings, we are raising our ratings," IBCA said.

Christiania Bank: IBCA raised this Norwegian bank's long-term rating to A-minus from BBB-plus. After suffering heavy losses in recent years, Christiania Bank is now showing a decline in nonperforming loans and posted a profit in the first half of this year.

Daiwa Bank: Moody's may downgrade this Japanese bank's long- and short-term ratings of Daiwa Bank Ltd. in light of the bank's announcement that it will acquire Cosmo Securities Co., a distressed securities company. About $1.4 billion of long-term debt is affected.

Moody's said that it would evaluate the potential impact of the acquisition on the bank's core earnings. Under review are A 1 senior debt, long-term deposit, and long-term letter-of-credit ratings and the A2 subordinated debt rating.

HFC Bank: IBCA Ltd. assigned an Al rating to guaranteed short-term debt and an A2 rating to unsecured short-term debt of this British unit of Household international Inc.

Long-Term Credit Bank of Japan: Moody's lowered senior debt to A3 from A2, citing deterioration in the bank's loans to real estate developments and nonbank financial institutions.

"Major losses are likely, and additional problem exposures could emerge," Moody's said.

The short-term rating also was lowered, to Prime-2, from Prime-1. Like other large Japanese banks, Long-term Credit Bank has been hurt by loans to housing finance companies, which have been rocked by depressed home prices in Japan.

NationsBank Corp.: Moody's investors Service upgraded senior debt to A2 from A3, subordinated debt to A3 from Baal, and commercial paper to Prime-1 from Prime-2. Long-term deposits of subsidiary banks were confirmed at Al. Senior unsecured debt of the subsidiary C&S/Sovran Corp. was raised to A2 from Baal.

For MNC Financial Inc., a Baltimore-based bank holding company being acquired by NationsBank, senior unsecured debt was increased to A2 from Ba3, subordinated debt to A3 from B2, and preferred stock to A2 from B2.

The upgrades occurred after the Charlotte, N.C., company priced a $1 billion, two-part offering of senior and subordinated debt.

The agency noted that NationsBank has significant shares of most major markets in the Southeast and Texas. It added that NationsBank's aggressive acquisition strategy - the company is buying MNC Financial Inc., Baltimore, as well as a number of nonbanking companies -- are one cause of concern.

"Major acquisitions increase uncertainty and add to risk, especially in the area of systems and controls." Moody's said.

It added that capital levels are thin in light of the company's diversification into unregulated nonbanking businesses.

Shawmut National Corp.: The Hartford, Conn.-based company received upgrades from Thomson BankWatch and IBCA, with both agencies citing improved asset quality and stronger capital and earnings. Bankwatch boosted senior debt to BBB from BBB-minus, subordinated debt to BBB-minus from BB-plus, and preferred stock to BB-plus from BB.

IBCA raised the long-term rating to BBB-plus from BBB and the short-term rating to A2 from A3. BankWatch noted that Shawmut's nonperforming assets declined 36% in the second quarter and that remaining nonperformers are covered by reserves.

"The work is not complete, however," the agency added, noting that nonperformers total 3.84% of loans and foreclosed property.

In addition, BankWatch said Shawmut would be challenged by the New England operating environment and the pending acquisition of New Dartmouth Bank, Manchester, N.H.

Southern National Corp.: Thomson Bankwatch affirmed the Lumberton, N.C., banking company's preferred stock at BBB-plus. Bankwatch noted that the recently announced agreement to acquire First Savings Bank, Greenville, S.C., will boost Southern's market position in that state to third place.

Southern National's "ability to realize cost savings from First Savings and compete more effectively in the South Carolina marketplace bode well for the franchise," BankWatch said.

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