For those afflicted with interest-rate fever, the past two weeks of earnings reports were a loud reminder that credit quality is still — and likely to be for some time — a downer.

And the list of those whose earnings buckled under higher loss provisioning and more problem credits was not confined to the arrangers of big syndicated loans. Milwaukee-based Firstar Corp., which has been considered a safe haven from credit quality problems because of its low profile in national syndicated lending, experienced an investor backlash when it revealed $100 million in nonperforming loans. The following day several analysts downgraded the company’s stock, and its share price fell 3.27%, to $22.1875.

“We all knew going into quarter that there were going to be higher problem assets,” said David Berry, director of research at Keefe, Bruyette & Woods Inc. The feeling by the end of the week: “Fatigue,” said Mr. Berry.

By Friday, 23 of the largest banks to report fourth-quarter and yearend profits had set aside nearly $6 billion in loan provisions and some $26 billion of loans on nonperforming status. Net chargeoffs totaled $5.4 billion in the quarter.

A mini-rally in bank stocks, sparked by the Federal Reserve’s 50-basis-point interest rate cut early in the month, fell flat. The American Banker index of the country’s 50 biggest banks, which had risen 6.6% from Jan. 2 to Jan. 16, lost 0.65% at the end of trading Friday.

Unexpected? Not quite, said analysts and investors. Many bank chief executives had been warning for at least a quarter that corporate bankruptcies, brought on by a slowing economy, would continue to extend the list of nonperforming loans on their books.

“We were expecting disappointing earnings and we got them, in more cases than not,” said Diane Glossman, a bank analyst at UBS Warburg.

Firstar’s performance was telling for one analyst. “It shows that credit problems are going beyond the large corporates,” said Ronald Temple, an equity analyst at Deutsche Asset Management in New York.

In the previous two quarters, banks were reporting the red marks in their large syndicated portfolios, as larger borrowers felt the squeeze of higher interest rates. Several of the worst hit rushed to unwind credits to “nonrelationship” borrowers, and those banks that could tout minimal exposure to the syndicated market, such as Wells Fargo & Co., were well-rewarded by investors.

But now there are signs that a slowing economy is hurting smaller companies, and thus lenders.

This quarter, “you started to see banks with exposure to more middle-market borrowers feeling the impact,” Mr. Temple said.

Big loans, of course, remain a concern. Bank One Corp. made one of the biggest waves last week. A $1 billion increase in its loan allowance and problems in its credit card unit contributed to a $512 million loss for the quarter. Nonperforming loans at the Chicago-based company increased 20% from the third quarter, to $2.5 billion.

Bank of America Corp., which like its Charlotte, N.C., neighbor First Union Corp., has had problem loans jolt earnings since the second quarter of 2000, also shouldered some heavy blows to earnings from credit quality in the fourth quarter. A 55% increase in nonperforming assets from the third quarter, to $5.5 billion, caused earnings to drop 27% year-on-year.

Fourth-quarter results at the major banks resulted in a slew of downgrades by the sell-side analysts who recommend stocks. Besides Firstar, analysts took down Bank of America Corp. and Bank One — in the case of Prudential Securities analyst Nancy Bush, by two notches.

At the same time, and sometimes triggering the downgrades, executives from companies such as Bank One, FleetBoston Financial Corp., and more recently Compass Bancshares, have been talking down their estimates for the year.

“The mood of a lot of these guys was better three months ago,” Mr. Berry noted.

Observers said they did not expect banks to slough off the specter of bad loans for at least another quarter. This is particularly the case as banks seem to be varying greatly in how they handle the same weak credit — a large commercial loan popping up in one bank’s nonperforming category won’t appear in another lender’s report until the next quarter.

Still, even at this point some bank watchers are starting to look at other drivers besides credit quality. “Somewhere between last quarter and now, the interest rate cycle and capital markets started playing a part” in how investors viewed bank stocks, Mr. Temple said.

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