Apparently confident about the future, major banks continue to reduce the amount of money set aside to cover loans that might not be repaid.

For the 19th time in the past 22 quarters, the nation's 22 largest banks effectively made net withdrawals from their loan-loss reserves. That is, first-quarter quarterly provisions to reserves did not cover chargeoffs, according to Raphael Soifer, the banking analyst at Brown Brothers, Harriman & Co., New York.

But chargeoffs themselves remained at or near record-low levels at most banks, particularly among commercial credits.

The sustained expectation by bankers that neither businesses nor consumers will face problems with loan repayment is without precedent "at least in this generation," Mr. Soifer said.

From the broader economic perspective, it signals that bankers expect inflation, and hence interest rates, to remain low.

From a bank stock investor's point of view, trimming loss reserves is a powerful positive move, since these reserves detract from earnings and lower a bank's return on equity.

Had banks' loan-loss provisions matched actual loan-loss rates, returns on equity would have been sliced to 18.4% from the record 18.7% rate compiled by Mr. Soifer.

He noted that returns posted by banks are the highest since the fourth quarter of 1993, when spectacular trading profits lifted bank earnings to unprecedented heights.

But that party abruptly ended when the Federal Reserve began increasing interest rates in early 1994 and derivatives-related losses started popping up.

These days, however, banks are among Wall Street's favorite companies, and Mr. Soifer said the provision-cutting appears to reflect the thinking that the good times can keep rolling.

"Apart from credit cards, net chargeoffs are still very low," said the analyst, who surveys operating trends among major banks each quarter.

Net chargeoffs exceeded loss provisions at seven of the 22 companies, Mr. Soifer reported, while chargeoffs and reserves were equal at another seven. The quarterly provisions at the remaining eight companies exceeded loan losses.

Not surprisingly, regional banks, with little exposure to Asian countries or other more speculative kinds of lending, showed the lowest levels of nonperforming loans.

SunTrust Corp. and Wachovia Corp., known as careful lenders, reported nonperforming first-quarter loans at a meager 0.32% and 0.33% of all loans, respectively.

Bankers Trust Corp., which does a lot of lending and underwriting of companies deemed speculative by credit-rating agencies, reported that 2.27% of its loans were nonperforming. While higher than any money-center or regional bank, that number was still substantially lower than the 3.10% nonperforming loan ratio the company reported in the first quarter of 1997.

Bankers insist a repeat of the derivatives debacles of 1993 and 1994 is unlikely thanks to improved risk management controls, but there is no question that banks are relying increasingly on trading to generate earnings, in addition to fees from asset management.

Noninterest revenues grew 12% in the first quarter to a record from the fourth quarter of 1997, Mr. Soifer said.

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