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NBD BANK 'AA/F-1+' STRUCTURED RATINGS AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --

 NBD BANK 'AA/F-1+' STRUCTURED RATINGS AFFIRMED BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, March 23 /PRNewswire/ -- The "AA/F-1+" long-term and short-term ratings for structured transactions backed by NBD Bank N.A. are affirmed by Fitch. The bank is the lead subsidiary of Detroit-based NBD Bancorp. The action follows the announcement of NBD's proposed acquisition of INB Financial Corp., Indiana. The acquisition will be consummated through a stock transaction and pooling of interest. NBD's "AA" implied senior debt rating is also affirmed. The credit trend is stable.
 Including NBD's acquisitions of Gainier Corp. and Summcorp, both Indiana institutions, an evaluation of the INB transaction based upon pro forma reported results suggests a neutral to slightly negative impact on the consolidated company. However, the benefits that will accrue to NBD's midwestern franchise are not fully reflected in the pro forma results. Fitch believes the INB acquisition will position NBD to compete more effectively with other "AA" rated midwestern superregionals such as Banc One Corp. and Norwest Corp. NBD's expansion strategies and focus are still Midwest-oriented compared with Norwest's and Banc One's strategies encompassing broader markets.
 The proposed INB acquisition will result in modest pretax cost savings, estimated at $12 million and $44 million for years 1993 and 1994, respectively, which will be offset by restructuring charges. Unlike in-market mergers, investors should not expect to see significant improvements in NBD's efficiency ratio, which will remain in the mid-60 percent range. The impact of the transaction on profitability is also deemed to be neutral. On a pro forma consolidated basis, NBD's return on assets (ROA) will remain about 0.95 percent, and the ROA generated by the Indiana operations will increase slightly to 0.75 percent from 0.72 percent. Similarly, the pro forma consolidated net interest margin and spread will increase by 3 to 5 basis points.
 Capital levels will remain strong as Tier 1 and total risk-adjusted ratios increase modestly to 8.21 percent and 10.64 percent from 8.06 percent and 10.59 percent, respectively. The leverage ratio will also increase to 6.2 percent from 6.11 percent. Because of NBD's low credit risk profile, capital is considered sound.
 Asset quality will reflect some deterioration as INB contributes $94 million of nonperforming loans (NPLs) and $32 million of foreclosed assets, accounting for 27 percent of total pro forma nonperforming assets (NPAs) of $465 million. The nonperforming assets ratio is estimated to be 1.9 percent, and reserve protection against NPLs will be 97 percent, consistent with Fitch's "AA" rated companies. While INB has experienced weaker asset quality (2.9 percent NPA ratio) because of its commercial real estate loans (mortgages and construction loans) the combined loan portfolios would not result in troubled concentrations. Pro forma commercial real estate and construction loans would be 6 percent and 5 percent, respectively, compared with 6 percent and 4 percent pre-merger. Commercial and industrial loans would decline slightly to 46 percent of total loans as consumer and credit loans would increase to 25 percent from 23 percent. NBD will have 45 days to examine INB's loan portfolio, which could result in higher credit expenses and possibly an increase in NPAs under NBD's conservative standards. However, Fitch expects the amounts to be manageable relative to underlying core earnings and capital.
 From a market-share perspective, NBD will become the dominant player in Indiana and three of its largest markets, Indianapolis, Fort Wayne, and Gary-Hammond.Based on deposit share, NBD would hold 15 percent of the state's deposits and an average 30 percent of the three primary markets. In terms of total assets, NBD's Indiana operations will increase by nearly 2.5 times to $11.4 billion, twice the size of National City Corp., Ohio, and 1.6 times the size of Banc One, Indiana. More importantly, the proposed INB acquisition would diversify NBD's earnings and loan composition away from Michigan. Although NBD has avoided problems in Michigan, and Michigan's operations contribute a healthy ROA of 1.09 percent, exposure to the declining auto and auto- related industries warrant ongoing attention. However, NBD's auto- related exposures are less than 10 percent.
 As consolidation continues in the Midwest, NBD will continue to be a major player. Consequently, management will need to review capital issues and management depth as the institution exceeds $40 billion in asset size. As a significantly larger company, credit risks will likely increase because of expanded lending capacity although NBD has demonstrated prudent and conservative underwriting standards, and credit policies.
 -0- 3/23/92 R
 /CONTACT: Fay Y. Wong of Fitch, 212-908-0531/
 (NBD) CO: NBD Bank N.A. ST: Michigan IN: FIN SU: RTG


SH -- NY050R -- 1031 03/24/92 11:51 EST
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Publication:PR Newswire
Date:Mar 24, 1992
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