First Union Corp. warned analysts Tuesday that it may have to classify a "large" commercial loan as nonperforming in its fourth-quarter results.

The disclosure was also made late Monday in the Charlotte, N.C., company's quarterly filing with the Securities and Exchange Commission. Executives talked about the troubled credit during a presentation with analysts Tuesday, though they declined to identify the customer. "In late October, the financial condition of a single large borrower deteriorated significantly," the SEC filing said.

G. Kennedy Thompson, chairman and chief executive officer, said in the conference call Tuesday that the loan would amount to about 0.4% of the company's loan portfolio, which was $123 billion at the end of the third quarter. That would be a troubled credit of roughly $490 million, and the company indicated that the exposure was far higher than typical. In the third quarter the largest troubled credit was $60 million, it said.

Part of the credit in question was already accounted for in the third quarter. First Union, which is restructuring its balance sheet, has been moving a portion of its troubled and nonperforming loans to another category: "loans held for sale."

"It's an older credit, a busted syndicate, and it's a company that has been in the news," Mr. Thompson said of the most recent troubled credit.

First Union shares fell 10% in afternoon trading. They closed at $27.50, down $2.5625, or 8.52%.

The disclosure was another indication that credit quality would continue to plague the banking industry for the foreseeable future. First Union and other banking companies have been reporting rising levels of nonperforming assets since late last year, which were first blamed on exposure to troubled health-care companies and then expanded to include movie theatre chains, retailers, and start-up telecommunications firms.

Executives on the conference call, a daylong discussion of the company's outlook, said chargeoffs during the fourth quarter could reach as high as 1.60% of loans, up from 0.58% through the first nine months, reflecting the impact of the unidentified problem loan. Without that one credit, chargeoffs were estimated at 0.40% to 0.50% of loans. They said credit costs during the fourth quarter would total "less than $300 million."

The executives also said they expected credit quality to deteriorate next year, projecting chargeoffs will rise to 0.60% to 0.80% of loans. That is a revision from previous estimates of 0.60 to 0.70%.

The company said it remained optimistic that it could otherwise meet the fourth-quarter expectations it had set in another conference call in June.

"Next year will be a challenging year but we have absolutely the right business model," Mr. Thompson told analysts Tuesday. "We are focused on the right things and we are ready for the changes ahead."

First Union projected that 2001 earnings growth would be less than 10%, reflecting the impact of lower gains from private equity investing, the continued runoff of the company's leverage lease portfolio, and the assumption that capital markets would continue to be volatile. Revenue growth will be in the low to mid single digits next year but will outpace expense growth, the company said.

Despite the company's evident concerns with the quality of its commercial lending portfolio, Mr. Thompson and other executives reiterated their projection of achieving 10% earnings per share growth within three to five years, gains they say will be fueled by cost-cutting initiatives now in place and by growth in its three core businesses: capital markets, investment management, and retail and corporate banking.

Revenue growth for the same period was projected to be 12% to 15% in capital markets, 18% in investment management, and 4% to 6% in general banking, the executives said.

In the presentation, the company said it would continue to push further into the private equity markets. The company has sunk $1.334 billion into venture capital this year, against $1.01 billion for all of last year.

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