Standard & Poor’s Lowers Debt Ratings on Citicorp

Standard & Poor’s, one of the nation’s two major credit-rating agencies, on Thursday took the unusual step of downgrading the debt ratings of Citicorp, the nation’s biggest banking group.

S&P; said the move affects $30 billion in debt.

It lowered the rating on Citicorp’s senior debt to AA-minus from AA.

The ratings on other debt issues were also downgraded.

The agency said New York-based Citicorp had a “diminished flexibility to face increased risks in the general business environment.”

Citicorp said it was disappointed by the decision.

“We are confident that the strength of Citicorp’s core businesses and well-positioned global franchises will continue to provide excellent returns and growth,” the company said.

Moody’s Investors Service, the other major agency, has already placed Citicorp debt on its “watch” list.

Moody’s cited Citicorp’s exposure to problem Third World loans, a declining real estate market and highly leveraged corporate buyouts in which it had participated.

Major banks, including Citicorp, have reported sharply lower first-quarter earnings as they put aside large sums of money to cover any loans that may go bad.

S&P; said that while Citicorp had successfully navigated itself through the crisis in Third World debt, it is “in a weakened condition to confront deteriorating loan quality in other portfolios, particularly in real estate.”

It said capital levels, the cash cushion banks must have, are low.

But it also noted that “Citicorp, as the largest bank in the U.S., derives great benefits from its diversification worldwide and across a wide variety of product lines.”