A big surge in commercial lending, ignited last year by turmoil in global financial markets, may soon run its course.

Bankers and analysts say loan demand, though still relatively strong, is starting to ease as capital markets stabilize and corporations return to them for funds.

"It's like an Indian summer for commercial lending," said Ben B. Crabtree, a regional banking analyst at Dain Rauscher in Minneapolis. "It's good, but everyone knows it's not going to last."

In the first three weeks of the new year, the growth of commercial loans at U.S. banks slowed to an annual rate of 4.85%, from 16% in the fourth quarter of 1998, according to the Federal Reserve Board. At one point last fall, the data show, the growth rate nearly hit 25%.

"For planning purposes, we've dialed back our expectations to the high single-digits," said Robert J. Higgins, president and chief operating officer at Fleet Financial Group in Boston. Fleet notched a 15% jump in commercial loans for 1998.

The expected slowdown is important because commercial lending helped many banks post record earnings for the fourth quarter. While most observers say they still expect healthy lending in 1999, they say the activity is almost certain to fall short of last year's boom.

"It's a transient phenomenon," said Bear, Stearns & Co. analyst Sean Ryan. He said any price advantage banks now have over the debt markets will evaporate as the markets stabilize. That may well occur by the second quarter.

"The general feeling is that commercial lending will not be as robust this year," added Frank Barkocy, an analyst at Josephthal & Co.

A study by Salomon Smith Barney suggests that the drop may be the sharpest for middle-tier regional banks, where commercial lending often accounts for 60% of revenues. The study shows this group's loan growth dropping to a rate of 7.7% in 1999 from 21.2% last year.

That calculation includes all loans, but many analysts said commercial activity has been the key driver of loan growth-and higher earnings-for regional banks.

"It was hard to see any bank that didn't benefit from it," Mr. Crabtree said.

For example, Comerica Inc. in Detroit posted 21% growth in commercial loans last year, and a 14% jump in profits.

Fleet, with its combination of strong fee income and commercial loan growth, posted a 14% climb in fourth-quarter earnings and a 25% gain for the year.

Wachovia Corp. in Winston-Salem, N.C., saw 10% growth in commercial loans and recorded profit gains of 17% and 12% for the fourth quarter and the year, respectively.

Bankers and analysts attributed last year's lending jump directly to volatile capital markets. Middle-market companies, which had relied on the high-yield bond market for financing, began flocking back to traditional bank products as capital markets froze up.

Anecdotal evidence suggests bank loans retain some of that new popularity.

"There still may be some fear of the capital markets," said James J. McDermott Jr., chief executive officer of Keefe Bruyette & Woods. " 'Hug Your Lender' seems to be the cry of the day."

But that fear is expected to subside as the markets come back to life. Analysts said companies at the higher end of the middle market-banks' most sought-after customers-should return to the capital markets by the springtime.

"There was really a knee-jerk reaction in October that was overdone," said Carla D'Arista, an analyst at Friedman Billings Ramsey. "We expect that the general environment will calm. Some of the extremist concerns have abated."

Still, bankers and analysts said the strong first few weeks of this year should benefit first-quarter earnings.

"The early signs are that there continues to be strong commercial loan growth, and so our revenue momentum will continue this quarter," said Wayne Mielke, a spokesman for Comerica.

"Strong first-quarter earnings are in the bag at this point," agreed Anthony Polini, an analyst at Advest Inc.

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