Hibernia Corp. is continuing to battle asset-quality problems this year after performing a fourth-quarter cleanup.

The New Orleans banking company said Wednesday that it would increase its loan-loss provision for the full year by about 19%, to $85 million, because of concern about further weakening in the national economy.

During a conference call with investors, J. Herbert Boydstun, Hibernia's chief executive officer, predicted that a slower economy also will lead to a further rise in consumer bankruptcies in Louisiana. Bankruptcies rose 2.2% in the state last year, though declining 5.5% in the nation.

Mr. Boydstun, who took over the top post in December, said he believes Hibernia is "on the right track" with credit quality. "Our top priority is improving our asset quality," he said.

The $16 billion-asset company's first-quarter earnings were flat from a year earlier, at $50.3 million, including a loss of $4 million on securities transactions. Excluding this loss, per-share earnings of 33 cents matched the analysts' consensus.

Mr. Boydstun said Hibernia will exceed analysts' earnings estimate of $1.30 per share for the year, but he did not say by how much.

Hibernia's first-quarter loan-loss provision was 10% higher than a year earlier, at $18 million. During the fourth quarter, the company used a $70 million provision to clean up its bad commercial loans.

"They are not close to being out of the woods on credit quality," said David Trone, a senior analyst at Prudential Securities Inc. "The trends are negative. Coming off such an aggressive cleanup quarter, I'm sure investors were expecting much lower credit costs."

The company's first-quarter nonperforming assets dropped 4.5% from the year before, to $84.5 million.

"The credit issue will continue to linger throughout this year," Mr. Trone said. "People are taking comfort in the higher margin, but you don't have the loan growth."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.