The economy's current expansion is more than five years old, and some Wall Street analysts think that makes it high time to hunt for good late- cycle bank stocks to buy.

The later phase of a growth cycle tends to feature slackening business conditions after a peak in interest rates. That creates special conditions favoring some banks, and it makes their stocks good defensive holdings for investors.

"As the economy slows down, loan losses go up, loan volume goes down, and margins generally narrow," said Richard X. Bove, an analyst at Raymond James & Associates, St. Petersburg, Fla.

"It becomes difficult for all banks to do well, simply because less business is available," he noted.

This time around, Mr. Bove and other banking industry observers said, banks generally are better positioned to contend with an adverse economy than they have been in previous business cycles.

But as always, the best-equipped banking companies are those that can boast high flexibility in their balance sheets, a diverse business mix, and favorable geographical location.

Mr. Bove said this group includes trust-oriented and fee-oriented banks like Bankers Trust New York Corp., State Street Boston Corp., Wilmington Trust Corp., and Northern Trust Corp.

"Banks that have strong fee-based business and that do not have major commitments to the loan sector can weather the storm much better than those banks that are building a loan portfolio," he said.

SunTrust Banks Inc., the traditionally conservative Atlanta-based company that has banks in Florida and Georgia, is also well positioned because of its region, said analyst Charles M. Vincent of PNC Asset Management, Philadelphia.

The Southeast is advantageous to banks because it has a growing population and business sector, Mr. Vincent said, which means deposit and loan increases. The Midwest also offers banks a more stable regional economy with few boom or bust problems, he said.

Mr. Vincent noted that SunTrust has "consistently been profitable." He pointed out that the bank's return on equity was 18.53% last year, 150 basis points above the industry average.

A relative newcomer to the prospective late-cycle winner's circle is First Tennessee National Corp.

Analyst Bradley Ball of CS First Boston Inc. said 56% of First Tennessee's revenues were from nonspread, nonlending businesses.

What about banks that are heavily in the lending business? Analyst Anthony Davis of Dean Witter Reynolds said First Union Corp. and Wachovia Corp. are strong late-cycle prospects because of their demonstrably strong loan underwriting abilities.

Mr. Davis pointed out that chargeoffs by the two North Carolina bank companies and SunTrust recently have been less than 1% of average loans - and below the average for the nation's top 25 banks. Chargeoffs at Wachovia averaged 0.56% of loans in the 10 years through 1995; at First Union, 0.58%; and at SunTrust, 0.61%.

Analyst Anthony J. Polini of Advest Inc. likes Comerica Inc., Detroit, for similar reasons. Its first-quarter chargeoff ratio was 0.32%.

Another bank likely to stand out during a softening of the economy is Banc One Corp., Columbus, Ohio, according to analyst Robert B. Albertson of Goldman, Sachs & Co.

Banc One has weathered the last three recessions with little impact on earnings, he pointed out.

An important explanation, Mr. Albertson said, is that the Ohio bank's management is determined and able to "motivate its employees to go out and gain market share when other banks start slipping."

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