Chevy Chase Federal Savings Bank, Maryland's largest savings and loan, had its junk bonds downgraded by Moody's Investors Service to reflect the rating company's concern over the amount of troubled real estate loans on Chevy Chase's books.

"We believe there has been a significant deterioration in the asset quality of the thrift," Moody's analyst Blaine Frantz said yesterday. "The softening of the Washington metropolitan area real estate market has definitely impacted a number of institutions, Chevy Chase included."

Unlike many other local financial institutions, Chevy Chase had avoided a downgrading of its high-yield, high-risk junk bonds until this week. Perpetual Savings Bank, Sovran Financial Corp., Maryland National Bank, American Security Bank, Baltimore Bancorp and Riggs National Bank have had their debt ratings downgraded in recent months by Standard & Poor's Corp. and Moody's, largely because of the institutions' exposure to the area's sluggish real estate market. The changes mean the credit-rating agencies believe the debt has become a more risky investment.

Moody's lowered the rating on Chevy Chase's $120 million of "subordinated" debt from Single-B3 to CAA, which means the bonds "may be in default or there may be present elements of danger with respect to principal or interest" payments. A rating of C is the lowest rating a bond can receive from Moody's.

Frantz said troubled real estate loans at Chevy Chase increased to $164 million on June 30, up $74 million from the end of March. He said he expects the level of problem assets, called nonperforming loans, to increase even further in the next quarter. A loan is considered nonperforming when no interest payments are being made on it.

Frantz said Moody's thinks "the probability of government intervention has risen, simply based upon the fact that nonperformers continue to rise."

But Chevy Chase Chairman B.F. Saul II said yesterday he does not believe the thrift's real estate problems will affect Chevy Chase's overall performance. Commenting on the Moody's ratings change, Saul said, "I don't disagree with Moody's. When nonperformers go up, ratings change. But this bank is as safe a bank as you can find."

Saul said Chevy Chase's real estate problems are centered not on commercial developers but on home builders who had borrowed money for raw land and housing developments.

"Because of a general lack of working capital and slow sales and the inability of these builders to get financing from normal sources, we've had some problems," Saul said. "But these people have been in the business for many, many years, and they are good projects."

Because Chevy Chase's stock is not publicly traded, information on the thrift's financial performance is not publicly available. However, Saul said yesterday that despite the real estate problems, Chevy Chase recorded a $37 million profit in the first nine months of 1990.

He attributed a substantial portion of that gain to the sale of accounts in the thrift's $1 billion credit card portfolio. And he said Chevy Chase will continue to sell parts of its credit card portfolio as needed.

"The bank doesn't anticipate losses in a general sense," Saul said, adding that cash reserves will be increased without affecting Chevy Chase's profitability or capital, the cash cushion that thrift owners must provide to protect the federal deposit insurance fund from losses.

He said Chevy Chase has about 180,000 credit card accounts now earmarked for sale, "which would bring in another very large profit."

Frantz agreed that the sale of credit card accounts would provide Chevy Chase with money for capital, but he said, "we're not sure if the amount of capital generated by the sale would be sufficient in light of the deterioration in the metro Washington area." Saul said Chevy Chase currently meets all capital requirements and is not in danger of failing to meet the federal standards for capital in the future.

Elisabeth Hayes, who follows Chevy Chase for the Johnston, Lemon & Co. brokerage firm, said she has become more concerned about Chevy Chase's performance over the past few months, but said that was simply a reflection of the overall market.

"I was surprised to see the level of troubled loans jump," she said, "but they aren't as exposed to the real estate market as some of their competitors. ... It all really boils down to the economic environment here."