NEW YORK -- The credit strength of thrifts will come under the scrutiny of a new rating service offered by Keefe, Bruyette & Woods Inc., the New York investment banking firm best know for its analyses of commercial banks.
None of the nation's 50 largest thrifts will likely earn the service's top two ratings in the first "ThriftWatch" reports due out next month, said C. Edward McConnell, a Keefe senior vice president.
The median rating of the thrift industry as a whole, he added, will fall about a grade lower than the median rating for commercial banks.
"That's understandable with the problems that thrifts have run into in managing the gap between their assets and liabilities," Mr. McConnell said.
Keefe, founded by chairman Harry Keefe in 1962, already analyzes the creditworthiness of some 1,000 commercial banks -- the largest number followed by any of the several bank-rating services. Keefe rates them in nine categories: An A rating is best, followed by A/B, B, B/C, and on down to an E rating.
Investors use the ratings to judge the risk in an institution's credit instruments -- bonds, letters of credit, and certificates of deposit, for example. Another branch of Keefe also researches and makes markets in many commercial bank stocks.
On their credit strength, commercial banks currently earn a mediun industry rating of B/C from Keefe, Mr. McConnell said. Preliminary reviews of the top 50 thrifts give that industry a median rating of C/D, he said.
The ratings on individual banks also range from A to E, but none of the thrifts will get an A or A/B. And only those savings institutions owned by a large parent cmpany -- such as Citicorp Savings or Sears Savings Bank, both in California -- could earn a B rating, he said. Need Parents' Backing
Even those thrifts might earn lower ratings without the credit backing of their parents, said Allerton Smith, senior credit analyst at Keefe.
In setting up ThriftWatch, the first thrift rating service to appear, Keefe identified one risk that dominates the savings industry.
"The fortunes of thrifts rest almost entirely on the level of interest rates," Mr. McConnell said, and their ability to narrow their exposure to changes in those rates.
The balance sheets of most thrifts still suffer from the pounding they took in recent years. The cost of their …