If the first quarter is a sign of things to come, bank loan syndications may easily shatter last year's record loan volume.

With $190 billion in lending volume, the first quarter outstripped last year's first quarter by almost 79%, driven by a combination of sizable refinancings and acquisition loans.

Loan syndication continues to benefit from banks' high levels of capitalization and a relatively moribund public debt market.

Lending volume, however, declined slightly from a $192 billion fourth quarter, and was off from the record-breaking $203 billion third quarter.

Acquisition finance fell to $36 billion, down 17% from the fourth quarter.

While they didn't speculate on whether volume would exceed last year's levels, loan syndicators continued to believe that refinancings across the market would slow down, and acquisition finance would pick up.

Indeed, they say some of the profits from acquisition finance may enable banks to be more selective, easing the pricing pressure that has characterized the competitive marketplace in the last year.

"The high level of mergers and acquisitions from the fourth quarter is continuing, which is resulting in a lot of opportunities in the syndicated bank market," said Chad A. Leat, the managing director of loan syndications at Chase Securities Inc.

Mr. Leat said acquisition finance will benefit from continued consolidation in a host of sectors, including cable, media, insurance, defense, and health care.

"What's driving the market today is a lot of corporate takeover activity resulting from high share values," said Robert C. Griffin, executive vice president and head of loan syndications at BankAmerica Corp.

"In the first quarter, we saw that a lot of the very rabid competition from last year lightened up a bit," said one loan syndicator. "One of the reasons for that is that banks are making enough money so that they don't feel compelled to do crazy things."

While no one believed that pricing had reached rock bottom, some saw some stabilization. "Although there's still a bit of downward pricing pressure, I think prices, covenants, and maturities have stabilized somewhat in the last couple of months," said Mr. Griffin.

Chemical Banking Corp. has once again retained the top lending spot, leading 68 deals that generated more than $46 billion in loans.

Chemical commanded a 25% market share, up from 15% in the first quarter of last year.

Refinancing remained robust for Chemical despite the view in the market that refinancings are declining.

The two largest deals of the quarter were both refinancings led by Chemical: an $11 billion deal for ITT Corp. and a $10.5 billion deal for New Center Asset Trust.

J.P. Morgan and Co., acting as agent in 34 deals totaling $23.4 billion, jumped from third to second in the tables.

BankAmerica was the greatest gainer, rising to third from sixth, with 46 deals totaling over $15 billion.

BankAmerica also took over the top spot from Chemical in the rankings based on agent and co-agent roles, with $59.97 billion in volume, as compared with $58.37 billion for Chemical.

While bankers believe agent-only rankings are generally more indicative of market leadership, some view the agent/co-agent tables as a reflection of overall market participation.

Chase took fourth position on the agent-only ranking, with $14 billion in loan volume coming from 43 deals. The money-center bank jumped from fifth in the fourth quarter of last year, and from seventh in the first quarter of 1994.

Ranking just behind Chase with $14 billion in volume, Citicorp dropped from second to fifth from the final quarter of last year.

While many expect growth in acquisition finance, others think the pressure from lower quarter to quarter volume affected pricing and structure.

"Lower volume is certainly taking its toll on pricing and fees," said an analyst at Loan Pricing Corp. "Some people have gotten nervous about their budgets."

The analyst even noted that the bank market is supporting some riskier deals.

Nonetheless, industry watchers said that several previously announced deals are expected to close in the second quarter, which could raise volume in that period.

Chase, BankAmerica, and Chemical are leading a $3 billion, five-year revolving credit to Raytheon for its friendly acquisition of E-Systems Inc. The Raytheon deal is just the latest example of consolidation in the defense industry.

Additionally, bankers estimated leveraged buyout firms are ready to spend $15 billion driving up loan volume.

"Volume in the next quarter will be up, driven at least in part by acquisition financing both in investment grade and noninvestment grade," said James Lee, the head of global investment banking at Chemical.

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