Despite consumer credit woes and rising interest rates, analysts expect big banks to report first-quarter earnings up a healthy 12% on average.

Only three of the top 50 banks will report lower earnings than in the first quarter of 1996, and several could show substantial gains, according to consensus estimates tabulated by First Call Corp.

But analysts noted credit deterioration and slower economic growth could make it difficult to sustain earnings growth much longer.

"There is no quibble that 12% is pretty good, but business fundamentals have been slowing for at least two quarters," said Thomas McCandless of Natwest Securities. "It's not what you report, it's the composition of earnings that is important to the market."

SunTrust Banks Inc. Tuesday became the first major banking company to release first-quarter profits-up 7% to $161 million. At 74 cents a share it beat the consensus estimate by a penny. (See page 7.)

H.F. Ahmanson & Co., in hot pursuit of Great Western Financial Corp., increased net income by 59%, to $103 million. (See page 11.)

In general, said analyst Michael Mayo of Credit Suisse First Boston, commercial banks had an "exceptionally unexceptional quarter."

"It's not sizzling, but the key is to show stable earnings through different environments," Mr. Mayo said. "More banks are pursuing less, but more profitable, growth that results in less top-line growth and higher return on equity."

First Security Corp. of Utah was expected to report the best year-to- year improvement among the top 50 banks. The consensus forecast for the Salt Lake City-based company was 36.17% more than in the 1996 opening quarter. Summit Bancorp, Princeton, N.J., is expected to earn 20.38% more than last year and Fifth Third Bancorp of Cincinnati 15.79% more.

Wells Fargo & Co. is seen posting a decline of 30.06% because of costs related to the acquisition of First Interstate Bancorp.

But the standard deviation among analyst estimates for Wells was 0.37- greater than for any of the top 50 stocks. Standard deviation measures the divergence between high and low estimates; the greater it is, the more uncertainty there is about the numbers.

NationsBank Corp. and J.P. Morgan & Co. were expected to report modestly lower declines.

Slow loan growth will muffle net interest income, which makes up two- thirds of the total revenue stream, Mr. McCandless said.

Market-related income-from securities gains, foreign exchange, and venture capital-will also be weaker than last quarter, but still strong, Mr. McCandless said.

The analysts continued to argue that share buybacks will boost per-share earnings growth. They shook off concerns about interest rates that recently sparked a selloff of bank stocks.

"Higher rates have a psychological impact on the stocks," Mr. Mayo said. "The fundamentals are not materially changed.

Mr. McCandless said higher rates won't help banks' earnings growth, but to the extent that higher rates reflect a stronger economy they could herald stronger loan demand and better corporate credit quality.

Still, the Natwest analyst estimated that bank stocks as a group could fall a further 10% to 15%.

As for expenses, "the banks are doing better at managing them" Mr. McCandless said.

"Expenses are not going to jump, but they're not going to decelerate over the last quarter," he said.

Analysts said banks won't take the hit for loan losses in this quarter. Indeed, Merrill Lynch analysts expect chargeoffs to be between 0% and 3% down from the fourth quarter.

"While no credit disaster is looming, consumer losses are still trending up," the Merrill analysts said in a quarterly report. Merrill expects the banks' ratio of composite chargeoffs to average loans to reach an annualized 0.6%, up from 0.52% a year earlier.

Analyst Henry "Chip" Dickson said while he expects asset quality to remain fairly strong, his main concern is unsecured consumer credit-mostly credit card loans.

"We expect chargeoffs to be up, commercial asset quality to remain excellent, and reserve levels to remain strong," Mr. Dickson said.

Strong operating margins and expense controls should be sufficient to offset rising credit costs, he added. "We'll be watching revenue growth and how banks have reacted to the more volatile market."

The first quarter is typically the quietest for banks, in contrast to the "kitchen sink" tendencies in fourth-quarter reports. Many of the results of mergers in the last year remain to be seen.

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