U.S. banks are improving their skills at acquisitions and mergers, a recent global credit quality report on merger and acquisition activity by Standard & Poor's suggests.

The report, which evaluated the first-quarter credit ratings of companies with acquisitions pending, showed that banks remain unlikely to suffer a downgrade because of a merger deal.

The banks in the survey got five upgrades affecting $9.5 billion and only one downgrade, affecting $3.5 billion. The pattern had been similar in the fourth quarter: eight upgrades, affecting $34 billion in debt, and no downgrades.

Bank issuers are exhibiting strength and continuing the positive trend in rating actions during 1996, said the report.

Other types of financial institutions fared less well, because of credit problems. Among diversified banking firms and insurance companies there were three upgrades affecting $585 million of debt but five downgrades affecting $2 billion.

Two of the five downgrades included Advanta's Corp.'s subsidiary, to triple-B-minus from triple B, and a downgrade of Olympic Financial Ltd.'s senior and long-term debt, to double-B-minus from double-B.

In the fourth quarter there were seven upgrades among such companies, affecting $1.5 billion in debt, and three downgrades, affecting $4.3 billion.

Michael DeStefano, managing director of financial institutions at Standard & Poor's, said that banks have become much more savvy when it comes to executing mergers and acquisitions.

"We feel increasingly confident that banks can do mergers," said Mr. DeStefano. "They have demonstrated that they can integrate and acquire other institutions, still manage operating risk, and wring out cost savings."

Mr. DeStefano noted that upgrades are much more likely to happen when a higher-rated bank acquires a lower-rated institution.

Examples include: AIM Management Group Inc., whose rating was raised to triple-B-minus from double-B after its merger with Invesco PLC, a high- performing international asset manager, according to S&P. California Federal Bank, Los Angeles, had its rating raised to triple-B from double-B- minus after it bought higher-rated First Nationwide Holdings Inc.

The Standard & Poor's report also noted that 80% of the banking sector maintained a stable rating outlook in the first quarter. The outlook for much of the sector was stable in the fourth quarter as well.

Mr. DeStefano noted, however, that "only time will tell if the announced bank mergers" will do well. "The merger process created problems for active acquirers in the 1980s," he said, referring to companies like Bank of New England, an aggressive acquirer that eventually went bankrupt. However,"banks have a track record, and we have yet to see any problems on the operating side."

Meanwhile, for the first time in two years more industrial companies got debt downgrades than upgrades . In the first quarter there were 28 upgrades on $6.7 billion in debt and 33 downgrades affecting $26 billion in debt. In the fourth quarter, upgrades on industrial debt were 41 on $30.5 billion worth of securities, while there were 30 downgrades on $13.5 billion worth of debt.

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