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CORESTATES FINANCIAL CORP CREDIT RATINGS ASSIGNED

       CORESTATES FINANCIAL CORP CREDIT RATINGS ASSIGNED
    CHICAGO, Nov. 4 /PRNewswire/ -- Duff & Phelps today assigned an implied senior debt rating of  A+' (single A plus) to CoreStates Financial Corp (NASDAQ: CSFN), a rating of  A' (single A) to its subordinated debt and a preliminary rating of  A-' (single A minus) to the preferred stock component of a shelf registration.  The senior debt of CoreStates Capital Corp has been rated  A+' (single A plus), its subordinated debt has been rated  A', and commercial paper has been assigned a rating of Duff 1.  The debt issued by CoreStates Capital Corp is guaranteed as to the payment of principal and interest by CoreStates Financial Corp.  Further, the short-term deposits of CoreStates Bank, N.A., have been rated Duff  1+' (one-plus), our highest short-term rating, and long-term deposits have been rated  AA-' (double A minus). These are the initial ratings assigned by Duff & Phelps to these debt obligations.
    "The ratings reflect the corporation's strong earnings power, large capital base, and favorable competitive position as industry consolidation continues.  These positives are offset to an extent by some weakening in asset quality," said a D&P spokesman.
    Profitability has been pressured somewhat by credit-related expenses, although core earnings generation is well-above average. Third quarter 1991 return on assets equaled 1.11 percent, 1.01 percent for the first nine months, while core earnings (tax equivalent income before loan loss provision and securities gains/losses) equaled a large 2.61 percent of average assets for the third quarter and 2.46 percent for the first nine months of 1991.  This high level of profitability provides substantial capacity to effectively address loan problems before affecting capital.
    A large net interest margin and strong noninterest income generation are the basis for the high level of profitability.  Noninterest income equaled 2.27 percent of average assets in the third quarter, well above industry standards.  CoreStates' focus on several fee-based businesses, including electronic payment services, cash management and trust activities provides significant earnings diversification.
    CoreStates maintains an above average level of capital with stockholders' equity equaling 6.51 percent of assets at Sept. 30, 1991, and 6.05 percent excluding goodwill.  These ratios will likely improve through both earnings retention and the sale of $1 billion in credit card receivables.  This transaction will reduce assets and result in an estimated after-tax gain of $50 million, after the write-off of $76 million of intangibles, in the fourth quarter.
    Asset quality has deteriorated during this period of economic weakness and real estate market instability, although loan measures remain better than average and showed some slight improvement in the third quarter.  Nonperforming assets equaled 2.96 percent of loans and other real estate owned at Sept. 30, 1991, compared with 3.06 percent and 1.82 percent, three months and twelve months earlier, respectively. Nonperforming assets declined $12.5 million during the third quarter or about 2.5 percent.  However, net charge-offs remained high at 1.46 percent of average loans in the third quarter compared with .79 percent in the year earlier period.  While asset quality appears to have stabilized and significant increases in nonperformers are not expected, the economic environment remains weak and local real estate markets continue to soften which could result in moderate increases in problem assets in the near term.  Asset quality has been adversely affected in particular by credits assumed in the March 1990 acquisition of First Pennsylvania.
    Positively, CoreStates' exposure in two high risk lending areas, real estate construction and highly leveraged transactions, is relatively low at approximately 48 percent and 70 percent of equity, respectively, at Sept. 30, 1991.  CoreStates' loan portfolio is also characterized by a high degree of diversification and relatively low average loan balances.
    Philadelphia-based CoreStates Financial Corp is a multibank holding company operating over 350 domestic and foreign branches with total assets of $22.8 billion.  CoreStates ranked as the 33rd largest U.S. bank holding company at midyear 1991.  The principal operating subsidiary, CoreStates Bank, N.A., represents approximately 70 percent of consolidated assets.  Other bank subsidiaries include Hamilton Bank, New Jersey National Bank and CoreStates Bank of Delaware.  Nonbank subsidiaries include Congress Financial Corp. (commercial finance) and Signal Finance Corp. (consumer finance).
    -0-                 11/4/91
    /CONTACT:  Charles J. Orabutt Jr. of Duff & Phelps, 312-368-3153/
    (CSFN) CO:  CoreStates Financial Corp. ST:  Pennsylvania IN:  FIN SU:  RTG FC -- NY068 -- 0822 11/04/91 15:14 EST
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Publication:PR Newswire
Date:Nov 4, 1991
Words:734
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