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CHEMICAL BANKING CORPORATION PRELIMINARY CREDIT RATING UPGRADE

     CHEMICAL BANKING CORPORATION PRELIMINARY CREDIT RATING UPGRADE
    CHICAGO, Jan. 21 /PRNewswire/ -- Duff & Phelps Credit Rating Co. will upgrade the credit ratings of Chemical Banking Corp. and its principal subsidiaries upon completion of the corporation's planned $1.25 billion equity offering.  The ratings were placed on Rating Watch - Favorable on July 22, 1991, following the announcement of the merger between Chemical Banking Corp. and Manufacturers Hanover Corp. The merger was completed Dec. 31, 1991.
    Upon completion of the equity offering, the ratings will be removed from Rating Watch and upgraded as follows:  Chemical Banking Corporation's senior debt to "A-" from "BBB-plus"; subordinated debt to "BBB-plus" from "BBB"; preferred stock to "BBB" from "BBB-"; and commercial paper to "Duff 1" from "Duff 1-".  The long-term deposit rating for Chemical Bank will be raised to "A" from "A-" while the short-term deposit rating is reaffirmed at "Duff 1."  Deposit ratings for Manufacturers Hanover Trust Company are to be raised to "A"/"Duff 1" from "A-"/"Duff 1-."  The deposit ratings of Texas Commerce Bank, N.A. will be raised to "A"/"Duff 1" from "BBB-plus"/"Duff 1-."  The senior debt rating for Texas Commerce Bancshares is to be raised to "A-" from "BBB-plus."  The long-term deposit rating for Chemical Bank New Jersey will be raised to "BBB-plus" from "BBB" and the short-term rating reaffirmed at "Duff 2."
    The rating upgrades reflect the $1.25 billion common stock offering which will significantly raise capitalization measures, an improved outlook for prospective profitability given expected cost savings, a moderation in parent company double leverage, and an enhanced competitive position in local, national, and global markets.  These positives are tempered somewhat by the still high level of problem assets, although the strengthened capital position and improved core earnings capability provide greater flexibility in resolving asset quality problems.
    Based on Dec. 31, 1991, total assets, stockholders' equity, following the common stock offering, would approximate 6.1 percent of assets compared to a reported 5.2 percent at year-end 1991, while common equity will increase to about 5.0 percent from 4.1 percent.  The improvement in the internal generation of capital will result in further increases in capitalization measures in 1992.  An important component of the expected improvement in earnings and, ultimately, capital, is overhead expense savings.  Management expects annual expense savings of approximately $750 million, substantially achieved by 1995, through the consolidation of operations, staffing, and facilities.
    As indicated, a high level of problem assets will continue to restrain earnings.  Nonperforming assets equaled $6.2 billion at Dec. 31, 1991, approximately 7.2 percent of loans and Other Real Estate Owned (OREO), while non-Less Developed Country nonperformers totaled $4.9 billion or about 6.1 percent of related loans and OREO. Positively, loan quality appears to have stabilized, although significant improvement is not expected in the near-term, particularly with regard to problem real estate loans.
    Despite what could be a lingering level of loan problems due to the weak economic environment and instability in real estate markets, the merger of Chemical Banking Corp. and Manufacturers Hanover Corp. illustrates the advantages and benefits to be derived from intramarket mergers.  Expense savings, improvement in market share and competitive position, improved access to capital markets, along with a strengthening of management depth, reflect positively on the future prospects of Chemical Banking Corp.
    Chemical Banking Corp. ranked as the second largest U.S. bank holding company at Dec. 31, 1991, with $138.9 billion in assets.  The Corporation will have a dominant share of the middle market in the tri-state area.  Further, its expanded consumer franchise should enable the corporation to grow its already significant consumer and small business activity.  Other national businesses where Chemical will be a major participant include credit cards, mortgage servicing, student loans, and operating services such as cash management, fund transfer and corporate trust.
    -0-       1/21/92
    /CONTACT:  Charles J. Orabutt of Duff & Phelps, 312-368-3153/
    (CHL) CO:  Chemical Banking Corp. ST:  New York, Texas IN:  FIN SU:  RTG SH -- NY096 -- 1946 01/21/92 14:43 EST
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Date:Jan 21, 1992
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