First Union Rtgs Afrmd;Signet Banking's S&PWatch Pos.

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/21/97 --Standard & Poor's today has affirmed its ratings on First Union Corp. and its units (see list below). The outlook remains stable. About $8 billion of outstanding long-term debt and preferred stock is affected.

Concurrently, Standard & Poor's has placed its ratings of Signet Banking Corp. and its subsidiary, Signet Bank, on CreditWatch with positive implications (see list). About $350 million of rated long-term debt is affected.

The ratings actions follow the announcement that the $143 billion, multi-regional First Union and the $12 billion, Richmond Va.-based Signet have agreed to merge. The proposed merger will create the leading bank in the state of Virginia, with combined deposits of $20 billion. Standard & Poor's believes First Union will need to make significant investments in Signet's home market consumer and middle market franchise because Signet had diverted resources from its retail branch network as it pursued alternative delivery strategies.

This in-market merger provides the company with an opportunity to generate significant cost savings from the elimination of redundant operations and overlapping offices. Specifically, First Union estimates that it can generate $242 million of expense reductions within two years. This amount includes cost savings previously targeted by Signet as part of its ADVANCE project announced in June 1997. There is also the potential for modest revenue enhancements as First Union introduces its capital management and capital markets products to Signet's consumer and middle market customers. Nonetheless, this transaction will have minimal impact on First Union's consolidated earnings in view of the relative sizes of the two banking companies.

Signet brings not only its Virginia-based branch network, but also its nascent information-based, decision-making technology. While Signet has staked its future on this alternative delivery strategy, performance to date has been mixed. Consequently, Standard & Poor's believes First Union will need to revamp Signet's existing technology to maximize the potential of this acquisition.

The transaction will be financed through an exchange of common stock, and accounted for as a pooling of interests. As a result, the merger will provide a moderate boost to First Union's pro forma capital ratios. However, First Union has a history of aggressively managing its capital foundation; therefore, Standard & Poor's believes any improvement in capital ratios is likely to be short lived.

Signet, which has been struggling to improve its financial performance, will benefit from the diverse financial and managerial resources and the expanded product offerings of First Union Corp. Upon completion of the merger, Standard & Poor's expects Signet's ratings will be equalized with those of First Union.

OUTLOOK: Stable.

First Union's ratings and outlook incorporate the depth and breadth of its core franchise along the eastern seaboard. The geographic and business line diversification should lead to stable financial performance over the course of the business cycle. -- CreditWire -0-

RATINGS PLACED ON CREDITWATCH WITH POSITIVE IMPLICATIONS
Signet Banking Corp.
     Subordinated debt                       BB+
     Long-term counterparty                  BBB-
Signet Bank, Richmond VA
     Senior bank notes                       BBB/A-2
     Subordinated bank notes                 BBB-/A-2
     CDs                                     BBB/A-2
     Long-term counterparty                  BBB
     Short-term counterparty                 A-2

RATINGS AFFIRMED
First Union Corp.
     Senior debt                             A
     Subordinated debt                       A-
     Commercial paper                        A-1
     Long-term counterparty                  A
     Short-term counterparty                 A-1
First Union Corp. of Virginia
First Union Corp. of New Jersey
First Fidelity Inc.
     Subordinated debt                       A-
     Long-term counterparty                  A
First Union National Bank, Charlotte NC
     CDs                                     A+/A-1
     Long-term counterparty                  A+
     Short-term counterparty                 A-1
     Senior bank notes                       A+/A-1
     Subordinated bank notes                 A
First Union National Bank of Virginia, Roanoke
     CDs                                     A+/A-1
     Long-term counterparty                  A+
     Short-term counterparty                 A-1
     Senior bank notes                       A+/A-1
First Union National Bank, Avondale PA
     CDs                                     A+/A-1
     Long-term counterparty                  A+
     Short-term counterparty                 A-1
     Subordinated bank notes                 A
First Union Bank of Connecticut
     Long-term counterparty                  A+
     Subordinated bank notes                 A
First Union Keystone Inc.
     Long-term counterparty                  A+
     Senior notes                            A+
First Union Capital I
First Union Institutional Capital I
First Union Institutional Capital II
     Preferred stock                         BBB+

CONTACT: Charles D Rauch, New York (1) 212-208-1535

Richard Levine, New York (1) 212-208-8649