As a bargain hunter in the world of bank loans, Nicholas W. Lazares enjoyed a fruitful 1998.

His Atlantic Bank and Trust Co. in Boston spent a record $200 million on loans, including 90 California real estate loans he bought in December. It paid 88 cents on the dollar for that package, whose face value was $55.8 million.

Mr. Lazares, chairman of Atlantic, credits the good buys to a number of recent developments. Bank consolidations have forced portfolio adjustments. Nonbank buyers have become increasingly cash-strapped. And the risk climate is changing; banks have increasingly moved to reduce the risk in their portfolios through asset sales.

For consumer and commercial credit officers and risk managers, 1998 was notable not for what happened, but for what didn't. In the wake of the late-summer plunge of financial markets there were no major defaults, no major delinquencies, and no wide-scale credit crunch.

Yet as Atlantic Bank and Trust's experience indicates, lenders did make adjustments. More banks implemented risk-management models, and venture capital became hard to come by for start-ups or other companies that had yet to show profitability.

Those adjustments, credit analysts say, have put banks in a better position to fend off what they expect to be a slower-growing economy in 1999-a year when the credit cycle may turn toward tightness.

"Loan growth will not be strong," said Allen W. Sanborn, chairman of Robert Morris Associates, the commercial lender trade group. "Banks need to be very careful in budgeting. Bankers who haven't been through a recession need to get ready for a less-forgiving economy."

The fact that banks kept lending throughout 1998 pleased Mr. Sanborn. After the summer's economic crisis closed off the capital markets, many bankers and regulators feared credit would dry up.

"There was great concern about a credit crunch," Mr. Sanborn said. "But the banks by and large kept lending. You know that when things are shocked, people will take a good look at their practices."

"There wasn't a big swing" against borrowers, he added.

Still, many banks did take a hard look at lending practices. Acting Comptroller of the Currency Julie L. Williams warned in speeches throughout the summer that bank lenders were far too lax. Regulators even threatened to raise deposit insurance premiums if banks did not shore up their policies. Overall, credit became tougher to get.

Robert Morris continued to warn banks that their risk management practices were mired in outdated "buy and hold" strategies, with lenders holding loans on their books until maturity. The Philadelphia-based association released two reports highlighting the issue: "Winning the Credit Cycle," a survey of big-bank risk management in January; and "Beating the Odds," a survey of small-bank lending practices in November.

Two troublesome revelations: 88% of community banks did not use risk- rating models on loans; and 27% of large banks use a buy-and-hold strategy considered "vulnerable to risk."

Such warnings did not exactly shake up the industry, but they did grab attention. "My phone hasn't been ringing off the hook," Mr. Sanborn said. "But people are talking about it."

Many have been talking to Elliot Asarnow, a managing director with ING Capital Advisers Inc. in New York. A former risk management officer at Citicorp who now runs investment programs for third-party investors, Mr. Asarnow said slow progress is being made.

"Different segments of the banking industry are getting there," he said. "It's a big, big change. It's a much longer-term, secular trend, not really something you can turn around on a dime."

In the U.S. syndicated lending market-where the first signs of a credit crunch usually appear-volume was expected to finish at about $950 billion for 1998. That would be down from $1.1 trillion in 1997, according to Securities Data Co.

Volume could shrivel even more this year. A survey in November by Phoenix Management Services Inc. found that more than 40% expected to tighten credit standards during the coming six months, compared with only 18% in a survey six months previous.

Michael Rushmore, an analyst with BankAmerica Corp. in Chicago, said decreasing volume may be deceptive when trying to evaluate what types of credit decisions are being made.

"I fear a lot of people will think it's evidence of a credit crunch," he said. "But 1997 was a record year and it was a year of refinancing. It's like if you have a mortgage. You would refinance if you could do it cheaper."

Mr. Rushmore said corporate chief financial officers "were playing it smart" by not refinancing in 1998 because the market did not offer low interest rates. Loan prices were not prohibitive for new deals, he added.

"The fact is the bank market was still operating when other capital markets had closed," he said.

Likewise on the consumer side, there was no evidence of a credit crunch. Mortgage lending saw a record $1.4 trillion of originations, spurred by low interest rates, refinancings, and a robust housing market. Other consumer loans enjoyed moderate growth estimated at 5% more than 1997, according to the Credit Research Center at Georgetown University.

Michael E. Staten, director of the center, said there were encouraging signs that banks and consumers were taking a cautious approach entering the new year.

Overall consumer debt was $1.29 trillion at the end of the third quarter, up 9% from $1.18 billion at the end of 1997, according to the Federal Reserve Board. Although personal bankruptcies are expected set another record at 1.4 million for the year, Mr. Staten believes the worst is over.

"Consumers and lenders have pulled back a bit," Mr. Staten said. "Credit is still available."

Asked if there are any signs of a credit crunch, Mr. Staten said, "Not at all. It's more a case of reevaluating lending standards."

Mr. Staten said revolving credit, mainly credit card debt, remained the most accessible type of consumer loan. U.S. credit card debt was $531 billion at the end of October, up 6.6% from the end of 1997. Despite rising balances, consumers maintained good repayment rates.

The average borrower had $14,000 in outstanding debt, excluding mortgages, at the end of the third quarter, $5,300 more than in the first quarter of 1992, according to Trans Union Corp., the Chicago-based consumer credit information company.

But the firm also said accounts more than 60 days past due declined to 3.21% in the third quarter from 3.5% a year earlier. Banks, however, had better-than-average performance. Their delinquencies were generally half those of consumer credit and retail companies.

"The retailers are going after higher-risk customers," Mr. Staten said. "When you think about a retailer's customers, most already have versatile bank cards. The retailers are targeting people without credit."

The credit card risk data support the contentions of commercial and consumer lenders that they are making good decisions. That is good news going into a year of anticipated slower economic growth, if not a recession.

In the meantime, there is a growing awareness among bankers that there may be risks in loan portfolios. That will lead more of them to ask: Do we want to make risk management a priority?

"It's not a trivial question," ING's Mr. Asarnow said. "You then have to decide at a broad level what objectives your bank has."

Banks also will have to cope with a new kind of credit-risk danger, the kind brought to the headlines by Long Term Capital Management LLC.

That Greenwich, Conn., hedge fund required a $3 billion bailout from commercial and investment banks. The key problem could continue to be leverage-as high as 100 to 1-extended to money managers by bank trading desks.

Mr. Sanborn of RMA said 1998 provided an appropriate wake-up call for 1999: "People have caught their breath and realized that markets can go the other way."

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