After years of wooing consumers with everything from no-fee credit cards to newfangled home equity loans, banks are shifting their focus to corporate America.

Commercial loan outstandings at the nation's 50 largest business lenders grew 6.81% in 1997, according to data compiled by Sheshunoff Information Services for American Banker. At the same time, consumer loan outstandings declined 0.27% at the largest consumer lenders.

The data, economists say, are the latest evidence that banks are pulling back from an overextended consumer market in favor of a robust corporate one.

"There has been a sense that the consumer market is pretty well tapped in this cycle and banks are turning their attention elsewhere," said David Levy, director of forecasting at the Jerome Levy Economic Institute in Mount Kisco, N.Y.

Strong corporate profits are fueling demand for bank loans as businesses invest in acquisitions and expansion, economists say. Meanwhile, consumers are increasingly turning to other sources for loans, such as mortgage companies and finance companies, as banks tighten their credit standards.

"These nonbank companies have become much more aggressive, and as a result, banks are losing their market share," said Sung Won Sohn, chief economist at Norwest Corp. in Minneapolis.

To be sure, some of the decline in consumer outstandings at the larger banks reflects the growth of asset securitization, which removes loans from bank balance sheets. But the evidence that corporate lending is on the rise is strong.

Indeed, for all U.S. banking companies-including small regionals that tend to hold loans on their books rather than sell them-commercial lending grew 5.91% in 1997, compared with 4.59% for consumer lending.

Though mortgage lending continues to surge, up 8.22% for all banks and 1.59% for the 50 largest, other types of consumer lending have been dragging down the business.

Twenty of the 50 largest consumer lenders in the study lost ground in 1997 as their portfolios shrank. BankBoston Corp. had the biggest decline-a drop of 18% from 1996.

Like many other banking companies, BankBoston last year divested consumer finance operations it deemed unprofitable. Fleet Financial Group, which saw its consumer loans grow 4.88%, also sold consumer finance operations last year.

Meanwhile, corporate lending at BankBoston and Fleet surged 14.63% and 7.79%, respectively, as the New England economy picked up steam, economists said.

Smaller regional banks logged the biggest gains in consumer lending, according to the study. Regions Financial Corp., Birmingham, Ala., had a 15.07% increase in consumer loans, and Old Kent Financial Corp., Grand Rapids, Mich., had the second biggest gain, 14.97%.

Regions also reported a 22.14% gain in commercial lending, among the largest surges in the group, the study showed. Old Kent did not rank among the 50 largest commercial lenders.

While consumer spending climbs at a record pace, economists said, many banks are tightening their credit standards after two years of soaring personal bankruptcies and delinquencies.

Bankruptcies set a record of 1.3 million in 1997, a 19.5% increase from 1996, according to Visa U.S.A. Bank card delinquencies were also high in 1997, peaking at 3.69% in the second quarter before leveling off, according to the American Bankers Association.

"People are realizing they are overextended," said Charles H. Blood, director of financial markets and economic analysis at Brown Brothers, Harriman & Co.

Meanwhile, corporate America posted record profits in 1997 and is now looking to finance expansion. Banks, having emerged from the real estate debt crisis of the early 1990s, are poised to serve them and to regain some ground lost to Wall Street and the commercial paper market.

"Banks have got their capital structures where they want, and they are now moving to take back market share," Mr. Blood said.

Twenty-five of the 50 biggest commercial lenders posted double-digit gains in their outstandings last year, according to the study. As in the consumer sector, small regional banks posted the largest gains.

Union Planters Corp., Memphis, had a 52.94% jump in commercial loans. Crestar Financial Corp., Richmond, Va., followed with a 45.58% gain.

The sharpest decline came at Bankers Trust Corp., where commercial lending dropped 32% in 1997. A spokesman said changes in the way certain securities are classified artificially inflated 1996 commercial loan levels and that the drop in 1997 does not reflect a change in the lending portfolio.

Commercial lending has become more competitive, economists said, largely because interest rate spreads are narrowing and competition for customers has forced many banks to reduce the fees they would normally charge.

However, these analysts said, banks have been willing to invest resources in commercial lending with an eye to landing more lucrative business from a lending relationship.

"There's a lot of capital out there looking for work, and banks are working hard at building up their loan departments," said Nicholas Perna, chief economist at Fleet Financial in Boston. "Loans are viewed as a way of getting access to other business, getting your foot in the door."

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