Moody's Investors Service said Friday it may upgrade the debt of UJB Financial Corp. The agency said an upgrade, affecting $480 million in securities, will hinge on continued improved earnings and the Princeton-based company's ability to defend its market positions in New Jersey and eastern Pennsylvania.

The company's senior debt is rated Baa3. Subordinated debt and cumulative preferred stock are rated Bal, and an upgrade would lift UJB into investment grade in these categories, which have drawn heavy bank issuance in recent years.

Noncumulative preferred stock is rated Ba2 and commercial paper P-3.

Subsidiary Being Reviewed

Also under review are the subsidiary United Jersey Bank's Baa2/P-2 deposit and Baa3/P-3 standby letter of credit ratings.

Separately, Moody's said it upgraded $35 million in debt of another New Jersey banking company, Summit Bancorp., Chatham, N.J.

Senior debt was raised to Baa2 from Baa3 and preferred stock to Baa3 from Bal.

The rating agencies took the following other actions last week:

Banco Espano de Credito: Thomson BankWatch assigned an A-plus rating to the Spanish bank's senior debt. The agency noted that the bank, known as Banesto, posted sharply lower earnings last year, reflecting the recession in Spain.

The bank is raising $1.3 billion in capital. At yearend, Tier 1 capital was 7.8% of risk-adjusted assets. "The assignment of the senior long-term debt rating of A-plus reflects our expectation of improved performance," BankWatch said.

IBCA, the European rating agency, lowered Banesto's rating to C/D from C, noting that while the proposed new capital is important, the bank's weak performance over the last two years and the Spanish recession darken the company's profit outlook.

BankAmerica Corp.: Thomson BankWatch affirmed senior debt at AA-minus, subordinated debt at A-plus, and preferred stock at A. The action follows the company's issuance of $100 million in three-year medium-term notes.

Chase Manhattan Corp.: Thomson BankWatch upgraded senior debt to A from A-minus and subordinated debt to A-minus from BBB-plus. The upgrade followed Chase's recent stock offering, in which it raised $746 million.

Chemical Banking Corp.: Fitch Investors Service assigned an A-minus rating to a new $150 million issue of floating-rate subordinated notes, due June 15, 2000. Fitch said Chemical's credit trend is stable and that the rating reflects strengthened core earnings, reduced overhead, substantial liquidity, and improving asset quality.

First Alabama Bancshares:

Thomson BankWatch assigned a AA-minus rating to the Birmingham-based company's subordinated long-term debt. It described the company's debt level as modest and its debt-servicing capacity as more than adequate. Moody's confirmed long-term subordinated debt at A2.

First Interstate Bancorp: Moody's said it may upgrade long-term debt and preferred stock. Under review are Baa 1 senior debt and Baa2 subordinated debt and preferred stock. Moody's said the review will focus on First Interstate's competitive position in the West and progress it has made in improving asset quality.

Hibernia Corp.: Standard & Poor's upgraded the subsidiary Hibernia National Bank's certificates of deposit and medium-term bank notes to BBB-minus/A3 from BB-minus/B. S&P said the upgrade is based on the New Orleans company's substantially improved capital levels, strong liquidity, and its return to profitability.

Household Bank: Thomson BankWatch upgraded subordinated debt to A from A-minus, citing improved performance, stronger capitalization, and strength of the parent, Household International Inc. It said that prospects for the bank have brightened since it begain issuing credit cards on behalf of General Motors Corp.

Lloyds Bank: Moody's assigned a Aa2 rating to the British bank's long-term deposits. It said the rating reflects the bank's strong market position in commercial banking and insurance, good core profitability, and better-than-average capitalization.

Rochester Community Savings Bank: Standard & Poor' s assigned a B-plus rating to the bank's planned offering of $60 million in noncumulative preferred stock. The bank announced the offering as part of a recapitalization in which it is also earmarking $174 million in problem real estate loans for accelerated sale.

"The rating reflects the savings bank's asset quality problems but acknowledges its sizable capital base and well established business lines as a depository, auto lender, and mortgage banker," Standard & Poor's said.

U.S. Bancorp: Duff & Phelps assigned an A-plus grade to the Portland, Ore., company's $500 million shelf registration of subordinated debt. It cited the Portland, Ore., company's large capital base and above-average loan quality.

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