Norwest Corporation Receives 'AA' Rating from Duff & Phelps Credit Rating Co.

Duff & Phelps Credit Rating Co. has assigned an initial rating of 'AA' (Double-A) to Norwest Corporation's $125 million senior note issue, reflecting the company's demonstrated ability to consistently deliver financial performance that exceeds industry norms. The rating reflects Norwest's financial strength, flexibility, and well-diversified sources of revenue, including a nationwide mortgage company and a consumer finance subsidiary with offices throughout the United States and Canada. Despite experiencing securities losses related to changes in the interest rate environment, Norwest's interest rate risk has remained in check, and the outlook for the corporation's net interest margin is positive.

Key Takeaways:

• Norwest Corporation's $125 million senior note issue was assigned an initial rating of 'AA' (Double-A) by Duff & Phelps Credit Rating Co.
• The rating reflects Norwest's demonstrated ability to consistently deliver financial performance that exceeds industry norms.
• Norwest's financial strength and flexibility have been demonstrated over the past few quarters, despite experiencing securities losses related to changes in the interest rate environment.
• The company's well-diversified sources of revenue, including a nationwide mortgage company and a consumer finance subsidiary, have contributed to Norwest's robust performance.
• Norwest's national mortgage operation is not a large component of earnings, but its relative performance has improved in the second half of 1994, with increased sales of mortgage servicing rights.
• Profits at Norwest Mortgage in the most recent quarter equaled a robust 2.20 percent return on average assets.
• The acquisition of ITT's Island Finance unit may place pressure on Norwest's capital ratios, particularly tangible common equity.

Statistics:

• Norwest Corporation's $125 million senior note issue has a 7.75 percent interest rate and matures on March 1, 2002.
• The investment was priced at 99.623 to yield 7.821 percent.
• Norwest's mortgage servicing portfolio is valued at $72 billion and is expected to produce a steady stream of revenues from ongoing servicing and normal levels of sales of mortgage servicing rights.
• Norwest's financial leverage has recently been maintained around 6:1 and has only temporarily spiked as high as 6.25:1 following acquisitions or special dividends to the parent.

Sources:

• Duff & Phelps Credit Rating Co.
• "Norwest Corporation Receives 'AA' Rating from Duff & Phelps Credit Rating Co." (PRNewswire, February 22, 1995)