Denigrated for much of the 1990s as the boring part of the business, traditional banking - taking deposits and making loans out of them - is back in vogue.

While the biggest U.S. banking companies' first-quarter profits were eroded by declining revenues from fee businesses including brokerage, asset management, and investment banking, regional companies did well in lending and deposit-gathering.

Nonperforming assets remained a problem for many banks but not more than expected. And several successive Fed interest rate reductions this year, including a surprise 50-basis-point cut last week, are helping companies whose profitability relies on lending.

"It may not be such a great year to be in things such as investment banking, and that's the big guys," said John Moore, an analyst at Wachovia Securities in Charlotte, N.C. "But it's absolutely the year for core banking. You've got the margins, and if you're in a good market you can bring in the loans."

National City Corp. was the last of the 25 largest U.S. banking companies to report quarterly earnings. On Friday, the Cleveland company said its profits rose 4%, to $335 million, on strong loan growth. Excluding one-time charges, earnings per share of 54 cents were 1 cent above analyst expectations.

Loans increased 2% from the fourth quarter and 9% from the year-earlier period, to $66.2 billion. Most of that growth was in commercial lending, National City said.

Regions Financial Corp. said Thursday that profits fell 4%, to $122.8 million, putting some of the blame on falling noninterest income and a higher tax rate. But loan growth was strong at the Birmingham, Ala., company, and earnings per share of 57 cents met the consensus estimate.

Though declining credit quality is still worrisome, especially with large corporate loans, there were no major unexpected warnings. "I think if anything," the quarter was "as advertised," said Christopher Marinac, an analyst at Robinson-Humphrey in Atlanta. "My sense is that credit quality has deteriorated slightly, but not dramatically."

NATIONAL CITY

"We think we are off to a good start and can build on it," CEO David Daberko said in a conference call Friday. "We made solid progress executing strategies."

The company has spent the last several months restructuring its balance sheet and exiting unprofitable lines of business in order to free up capital to invest in growth businesses such as processing, commercial banking, and asset management.

Credit quality stayed solid in the quarter despite the slowing economy, the company said. Nonperforming assets rose 11% from the fourth quarter and 42% from the first quarter of 2000, to $447.1 million. Net chargeoffs were $83.2 million, up 2% against the fourth quarter and 26% against the year-ago period.

Chief credit officer Robert J. Ondercik said chargeoffs and nonperforming assets will continue to rise slightly throughout the year. He said he had a "similar outlook" on chargeoffs and nonperforming assets in the second quarter.

National City "is on track to fall within targets" for 2001, said Jeffrey D. Kelly, chief financial officer. "We are generally pleased."

Mr. Daberko told investors the company was benefiting from the closure of its Loan Zone consumer finance stores and the exit from the wholesale loan origination business of its Altegra subsidiary and its automobile lending unit. "We believe we have turned the corner," Mr. Daberko said.

Shares of National City fell 0.3%, to $26.65.

REGIONS FINANCIAL CORP.

Last year's first quarter included gains of $17.8 million from the sale of Regions' credit card portfolio and other securities.

Total loans were up 7% against the year-ago period, helped by strong internal growth in commercial and industrial loans as interest rates fell. Margins were up across the board as well. Fee income rose 4% over a year ago, to $149 million, on good growth in service charges. Regions' net interest margin rose 3.69%, versus 3.51% in the fourth quarter.

Nonperforming assets rose 12% compared with the fourth quarter, to $267.6 million.

The company also noted its completed $738 million acquisition of the Memphis brokerage Morgan Keegan Inc.

"We are pleased to see positive results from our continued focus on ongoing initiatives, even with the challenges presented by a slowing economy," president and chief executive Carl E. Jones Jr. said in a press release. The Morgan Keegan purchase "will help to better diversify our revenue stream in the future."

Shares of Regions fell 1%, to $30.72.

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