Bankers are continuing to run their consumer loan machines at full tilt even amid signs that it might be time for some preventive maintenance.

Halfway through the 1990s, U.S. banks are producing profits as never before, stoked by credit cards and other growing, high-margin consumer credit businesses that show no signs of slowing down.

About 45% of all loans were to consumers as of Sept. 30 this year. Ten years ago, less than a third were consumer loans. The trend seems inexorable; the 1990-91 recession provided only the briefest interruption.

Though there is growing concern about an imminent turn in the credit cycle, if not an outright recession, lenders are confident that their income will be so plentiful as to compensate for any conceivable missteps.

"A lot of financial institutions are continuing to see better growth opportunities on the consumer side of the business than on the commercial side in many markets and geographic areas," said William E. MacDonald 3d, president and chief executive officer of National City Bank, Cleveland, and chairman of the Consumer Bankers Association.

With that growth, said Mr. MacDonald, comes competition, and pressure to lower prices.

"That has been tolerable to the industry because losses have been so low over the last couple of years," Mr. MacDonald said.

Might 1996 be the year when margin, delinquency, and chargeoff concerns come to the fore - or at least to a point where they cloud the profit picture, if not overall economic health? Expectations are generally upbeat for 1996, albeit with slower loan growth and rising delinquencies in seasoned portfolios.

"Consumer lending is very important for banks," said James Annable, chief economist for First Chicago NBD Corp. "The profits out of the business will carry them through the cycle" of delinquencies, he added.

The bottom-line impact of past-due credits will vary from bank to bank, depending on how much it may be dependent on consumer lending, said Susan Roth, an analyst with Bear, Stearns & Co. It also will vary according to actions the banks have been taking to cover chargeoffs.

"Some, like Citibank, have been adding to their loan-loss reserves in 1995," Ms. Roth said. "If you have higher losses, they are easier to absorb, especially if you're adding less in the coming year because you've now built sufficient reserves."

Through the first nine months of 1995, U.S. commercial banks earned $36.9 billion, up 8.5% from 1994, the Federal Deposit Insurance Corp. reported. The decline in Bank Insurance Fund premiums has had a positive effect, as has steady loan growth on both the commercial and consumer sides.

Over the 12 months ending Sept. 30, consumer loans grew by $57.7 billion, virtually the same as in the prior 12 months. But the FDIC said this "on-balance-sheet" stability masked a rampant upswing in credit card loans securitized and sold - 53% over that year, to $111.5 billion - and a $252 billion growth in unused lines of credit on cards.

At the end of September, only $518.5 billion of the $1.6 billion of banks' available consumer credit appeared on balance sheets, the FDIC said.

Meanwhile, consumer installment loans from all sources crossed the $1 trillion threshold in October, the Federal Reserve Board reported. Of that, auto lending accounted for $344 billion, the revolving credit portion $387 billion, and other nonmortgage loans $272 billion.

Meanwhile, the American Bankers Association's surveys of members have revealed rises in delinquencies over the last eight quarters. According to the most recent report, bank cards led the way with 3.3% of accounts at least 30 days past due. Of a composite of closed-end loan types, 1.98% were delinquent.

Cynthia A. Graham, president of Barnett Card Services, Jacksonville, Fla., said, "Credit cards tend to be kind of a leading edge of consumer credit problems because they're unsecured.

"If you look at the level of consumer and mortgage debt for U.S. households, we've been through a trough with consumers repairing their balance sheets," Ms. Graham said, which points to slower growth in credit card outstandings in 1996.

"You just can't sustain that level of growth given the more limited income growth of the most recent years," Ms. Graham said.

"At the same time, I'm not overly alarmed about consumer balance sheets. I think consumers have demonstrated an ability to carry a heavier debt load than they have currently."

Robert B. McKinley, president of RAM Research Group in Frederick, Md., predicted card issuers will cut back on the low-rate offers that have been prevalent for the past couple of years.

The researcher said issuers also will curtail extensions of credit lines to delinquent or overextended customers, and there will be more risk-based pricing, which would penalize less-healthy borrowers.

Moshe Orenbuch, an analyst with Sanford C. Bernstein & Co., said he expects a widening of the gap next year between the industry's better and worse performers.

"Ten years ago everybody made about the same money because the pricing was identical, but that's no longer the case," he said. "You'll see greater divergence in terms of loss rates."

Gary Schlossberg, a senior economist at Wells Fargo Bank in San Francisco, said most observers agree there has been an erosion of household credit quality - much of it due to the entry of new, low-income borrowers. But there is debate about this indicator's wider implications for consumer borrowing and spending.

"I come down on the side of those that feel the erosion might restrain spending growth, but not enough to stop consumer spending in its tracks," Mr. Schlossberg said.

Delinquency trends also have mortgage lenders concerned. Since its first-quarter delinquency report showed a 22-year low, the Mortgage Bankers Association of America has reported two consecutive increases in loans at least 30 days past due. The delinquency rate rose 9 basis points in the third quarter, to 4.24%.

That jump was not enough to be alarming, said Warren Lasko, executive vice president of the mortgage trade group. The most significant reason for the uptick, he said, was that loan portfolios are getting more seasoned. Because of the intense competition that occurs when rates go up, he added, lenders may have been under increased pressure to make lower-quality "B and C loans."

But overall, Mr. Lasko said, lenders have a lot to be happy about. Through the first nine months, FDIC-insured banks had $543 billion of mortgage loans, and these accounted for half of the industry's $57.4 billion total loan growth in the third quarter.

"If you look at the last four or five months, we've had some dramatic improvements in volumes," Mr. Lasko said. "The mood is dramatically improved in the mortgage lending community because rates are down. We're looking forward to a 1996 that is measurably better than 1995 in volumes of loans made and in earnings of mortgage lending firms."

Bankers have had a good year in auto lending and can expect the same in 1996, said Patrick S. Doran, senior vice president of PNC Bank Corp. and chairman of the Consumer Bankers Association's automobile finance committee.

Auto outstandings stood at $344 billion in October, the Fed reported, up 8.3% from a year earlier.

"It's not been spectacular by any stretch of the imagination," Mr. Doran said. "Next year everybody is probably throttling back just a bit," he added, reflecting the volume of car sales.

"I don't expect next year to be one where we go off the charts with losses and everybody starts tightening credit and crunching down," said Mr. MacDonald of National City. "I do expect there will be some firming up with pricing as losses increase, and that will probably slow the growth somewhat.

"I still look for there to be growth in consumer portfolios next year, but it won't be at the pace of the past several years."

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