Fitch Ratings has upgraded Hudson United Bancorp following its acquisition by TD Banknorth Inc.

TD Banknorth has completed its acquisition of Hudson United. Following this transaction, Fitch upgraded the ratings of Hudson United in line with those of TD Banknorth, removing the Rating Watch Positive, which was placed on the company on July 12, 2005.

The rating agency says that the transaction expands and enhances Banknorth’s franchise from both a geographic and business line standpoint. The acquisition adds to its Connecticut franchise and helps to fill in its branch network in Eastern New York State, while giving it entry into the New Jersey and Philadelphia markets, it notes.

Although the transaction is viewed positively from a strategic point, Fitch says it believes Banknorth will need to make substantial investments in Hudson’s retail franchise and will face some unique integration challenges associated with its specialty business lines. In light of the integration challenges presented by this transaction, Fitch would view negatively the addition of other significant integration challenges in the near to intermediate term.

The acquisition is relatively neutral from a capital perspective and Fitch expects Banknorth to maintain its capital position around current and projected levels. The addition of incremental leverage could have negative rating implications for Banknorth, it adds.

At this time, Fitch reiterates its view that TD must build tangible capital levels to provide support for its current ratings. Although regulatory capital measures remain sound, intangibles arising from acquisitions have pressured tangible capital, it says. Slow downs in the recovery of TD’s tangible capital will pressure TD’s long- and short-term ratings.

Fitch’s rating assessment of TD also incorporates its strong retail franchise in Canada, good revenue diversification, solid asset quality, and adequate reserves.