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UNION BANK $135 MILLION PREFERRED STOCK RATED 'A-', COMMERCIAL PAPER 'F-1' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, April 19 /PRNewswire/ -- Union Bank's $135 million 8 3/8 percent non-cumulative preferred stock is rated 'A-' and the $750 million commercial paper program is rated 'F-1' by Fitch. The 'A' subordinated capital notes are affirmed. The declining credit trend primarily reflects the sluggish economy and limited near-term lending opportunities in California.
 The ratings reflect Union Bank's strong funding profile, sound capital, and importance to Bank of Tokyo's U.S. operations. Today, Union announced a $100 million common stock issue which will boost the leverage ratio to 7.14 percent of assets from 6.85 percent reported at the end of the first quarter. The common stock offering will reduce Bank of Tokyo's ownership to approximately 70 percent from 76 percent.
 Profit growth remains constrained by limited lending opportunities and rising other real estate costs. First quarter earnings of $23 million or 0.58 percent of average assets were down slightly from 1992. However, a more aggressive pricing policy and good sources of fee income from Security Pacific branches acquired in 1992 have boosted non-interest income. In 1992, non-interest income rose to 23 percent of operating income from 20 percent in 1991.
 Although the portfolio remains subject to weak conditions in the real estate market, Fitch expects some stabilization in 1993 because of early of recognition of problem loans and assets sales. Nonperforming assets fell to 5.75 percent of loans and other real estate owned (OREO) at the end of the first quarter from 6.10 percent as of year end 1992. Commercial real estate and construction loans account for just over half of total nonperforming loans excluding OREO of $225 million.
 Union maintains reserves slightly in excess of 90 percent of non- performing loans. While coverage is somewhat lower than other 'A' rated institutions, Union's disciplined approach to setting aside provisions reduces loss potential. Fitch projects that if nonperforming loans were to rise 50 percent and reserve coverage maintained at 90 percent, net income would fall moderately to 0.46 percent of average assets from 0.62 percent in 1992.
 Conservative liquidity management provides a strong cushion to service commercial paper and preferred stock. Commercial paper is issued through Union Commercial Funding Corp., guaranteed by Union Bank, and supported by a Bank of Tokyo back-up facility covering 30% of the program. Union's outstanding commercial paper averaged $572 million in 1993's first quarter, down from $681 million a year earlier.
 -0- 4/19/93
 /CONTACT: Ricardo J. Kleinbaum, 212-908-0525, or Marc Pinto, 212-908-0618, both of Fitch/
 (UBNK)


CO: Union Bank ST: California IN: FIN SU: RTG

SB -- NY088 -- 7424 04/19/93 12:52 EDT
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Publication:PR Newswire
Date:Apr 19, 1993
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