WASHINGTON -- In the latest indication that business credit has been tight, banks' commercial and industrial loans declined 3% between June 30 and Sept. 30, regulators said last week.

Total C&I loans on Sept. 30, at $572 billion, were 8% below the level 12 months earlier, the Federal Deposit Insurance Corp. reported. Loans to individuals fell a more modest 4% over the year, real estate loans rose 3%, and other loans and leases were off 5%.

At National banks, whose totals are included in the FDIC figures, business loans on Sept. 30 had declined to $ 357 billion, the lowest since 1986.

"The banks are not willing to take any incremental risk," said Anthony Davis, a bank analyst with Wheat, First Butcher & Singer Inc. in Richmond, Va. "The Fed keeps putting money in the economy and it keeps going into the bond market. There is no lending going on."

Real Estate Loans Slackening

The lending figures were included in industry profit data released by the Federal Deposit Insurance Corp. for all 12,072 insured banks, and by the Office of the Comptroller of the Currency for 3,865 national banks.

The comptroller's office said C&I loans fell to $357 billion from $367 billion in the second quarter and $388 billion on Sept. 30, 1990.

For the first time in nearly five years, real estate loans outstanding at national banks fell. The decline over the past year was $4 billion, to $501 billion.

Total loans declined to $1.24 trillion, 1.6% les sthan $1.26 trillion in and 5% less than $1.29 billion in the 1990 third quarter.

Only the Comptroller's Midwest and central districts reported third quarter increases in real estate loans.

National banks earned a lack-luster $1.98 billion in the third quarter, down from $2 billion in the second quarter and $3.04 billion in the first quarter, but up from $1.57 billion in the 1990 third quarter.

Net income for the nine months was down 6% from the 1990 levels, at $6.97 billion.

The trends were similar to those for all FDIC-insured banks, which earned $4.3 billion in the latest quarter, $4.6 billion in the second, $5.6 billion in the first, and $3.7 billion in the third quarter of 1990.

Arnold Dill, chief economist at C&S/Sovran Corp., said, "the worst is behind us" and believes earnings are already beginning to pick up.

He also said nonperforming assets have begun to peak in many regions of the country, except for the West. Also, capital ratios are improving and the industry has a larger unrealized gain in its securities portfolio.

Signs of Capital Recovery

Despite lower earnings, the 3,865 national banks increased their capital to $1.87 billion. It was the largest third-quarter increase since 1988.

The average ratio of national banks' equity capital to assets increased to 6.31% from 6.05% at the third quarter of 1990.

The decline in net income was concentrated in the largest banks. National banks with more than $10 billion in assets earned $90 million, compared to $920 million in the second quarter and $820 million in the first quarter.

Their return on average assets dropped to 0.26% from 0.36% for the same period a year ago.

Upturn in Provisionings

The earnings dip was primarily due to increased loan-loss provisions, which jumped 35% to $8.07 billion in the first nine months of the year.

National banks in the Northeast reported $250 million in earnings for the first three quarters of the year, compared to a $120 million loss the same period a year ago.

"We are at or pretty near the bottom" of the real estate bust, said Edward Shea, vice president planning and research with the Massachusetts Bankers Association.

That turnaround reflects an easing in loan loss provisions to $3.7 billion in 1991 from $4.37 billion in the first three quarters of 1990.

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