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CITICORP $15 BILLION 'A' SENIOR DEBT AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --

 CITICORP $15 BILLION 'A' SENIOR DEBT AFFIRMED BY FITCH
 -- FITCH FINANCIAL WIRE --
 NEW YORK, Jan. 22 /PRNewswire/ -- Citicorp's $15 billion 'A' senior debt is affirmed by Fitch. Also affirmed are the company's $3 billion 'A-' subordinated debt and $2.1 billion 'BBB+' preferred stock. Citicorp's $1 billion commercial paper is affirmed at 'F-1.' The credit trend remains uncertain.
 The affirmation, which follows a review of Citicorp's 1991 operating results and related financial statements, reflects Fitch's expectations for improved core earnings and balanced sheet strengthening during the next 24 months. Quarterly profitability is expected, as are higher capital ratios and no material deterioration in aggregate non-performing assets.
 A sizable portion of Citicorp's expected performance turnaround is projected to take place during 1992, as is the final half of Citicorp's reorganization program. While the time necessary for the Citicorp to generate meaningful net income will likely absorb the next eight quarters, evidence of success should be in place at the end of 1992. Lack of solid progress would result in Citicorp's senior debt rating falling into the lower range of investment grade, factoring in the regulatory support evidenced in the past as an important element in the rating decision.
 Citicorp's operating performance has been a weakness when considering the impact on operational and financial flexibility. The corporation's growth has been constrained as to opportunities from existing sources as well as from possible acquisitions.
 A key element in the affirmation is the expectation for further improvement in the corporation's overall revenue margin. This margin, the difference between revenue and overhead costs, improved by slightly more $1 billion during 1991, rising from $4.7 billion to $5.8 billion. About 75 percent of this gain came from reduction in non-interest expenses while the balance represented a modest gain in total revenues. Adjusted for one-time internal charges and credits, the annualized rate for this gross margin was $6.2 billion for the final quarter of 1991. By the final quarter of this year, the expected annualized rate is $7.2 billion.
 Fitch anticipates the corporation's revenue being flat to up nominally for this year. The adjusted level of overhead expense for 1992 is expected to be $9.4 billion vs. $10.1 billion for 1991. Overall direct credit costs of $5.0 billion are expected for 1992, equal to 1991. In addition, further building of both commercial and consumer loan loss reserves is expected.
 Citicorp's overall asset quality is showing signs of stabilizing. Non-performing assets (NPAs), $13.9 billion at the end of last year, have basically plateaued during the past five quarters. The composition has changed, however, as real estate owned/controlled accounts for $3 billion, roughly double the amount a year earlier. Domestic commercial real estate accounts for $5 billion of the aggregate non-performing assets, vs. about $3.3 billion at the end of 1990. As with most large U.S. banking companies, Citicorp's non-performing loans to refinancing countries have declined sharply. The corporation's NPAs in this portfolio stand at about $1.7 billion, compared to $4.4 billion at the start of 1990.
 All-in credit costs during the past two years have been elevated for Citicorp as charge-offs in both commercial and consumer portfolios have remained high. Continued high credit costs are expected through at least 1992.
 Citicorp is the only major U.S. banking company that does not currently meet the fully phased-in guidelines for risk-adjusted Tier I capital. The corporation is in compliance with interim guidelines. With a minimum level of 4 percent necessary by year-end 1992, Citicorp's year-end 1991 Tier I ratio was 3.72 percent. Elimination of the common dividend will aid the corporation's internal capital generation when meaningful profitability is restored. No interruption in the dividends paid on preferred shares is anticipated.
 At the end of 1992, Citicorp's Tier I ratio is projected to be 4.1 percent. In addition to retained earnings, selected assets sales should produce realized gains and aid the capital ratio by removing assets from the risk-adjusted calculation. As an example of potential asset sales, a possible sale of Citicorp's remaining interest in AMBAC, a municipal bond insurer, could generate gains of $50 million at current prices. In addition, risk-adjusted assets would be reduced by nearly $200 million. At a minimum, Fitch expects the corporation's Tier I capital ratio to be 5 percent no later than the end of 1993.
 -0- 1/22/92
 /CONTACT: Fred W. DeBussey of Fitch, 212-908-0521/
 (CCI) CO: Citicorp ST: New York IN: FIN SU: RTG


CK -- NY080 -- 2389 01/22/92 14:21 EST
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Publication:PR Newswire
Date:Jan 22, 1992
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