Standard & Poor's Corp. dropped its ratings on a number of BankAmerica Corp.'s debt issues Wednesday, citing decreased earnings, large loan losses and high operating expenses.
The action--which the bank holding company said it "strongly disagrees" with--reflects longstanding trends and is not expected to significantly affect the bank's cost of borrowing or the price of its shares.
The New York-based rating agency said it was lowering by one grade ratings on the company's senior and subordinated debt, preferred stock and several debt issues supported by a Bank of America letter of credit.
Analysts called the downgrading a "non-event" because it comes months behind market reaction to events at the bank.
"Typically, ratings are lagging indicators. The marketplace penalizes earlier," said Richard Fredericks of Montgomery Securities, a San Francisco brokerage house. "I suspect if there were to be an effect (on the bank's cost of funds), it has already shown up."
Specifically, the rating on the company's senior debt was lowered to A+ from AA-, on its subordinated debt to A from A+ and on its preferred stock to A- from A. The rating on debt issues supported by a Bank of America letter of credit was lowered to A+ from AA-.
Ratings for commercial paper issued by the bank and its holding company were unchanged at A-1+.
BankAmerica, in a statement, said Standard & Poor's had failed to take into account the bank's "size, diversification, liquidity and funding base." It acknowledged recent, substantial loan losses but said that net interest income is up and that investments in new technology will begin to pay dividends in the near future.