Banks are moving to protect themselves against the rising indebtedness of consumers, but the defensive tactics vary widely and bank stock investors should look closely, according to a new study by Merrill Lynch & Co.

More investor scrutiny of bank credit practices now, while the economy remains healthy, could "eliminate a lot of sleepless nights down the road," the banking industry analysts at Merrill asserted.

"Banks are not just sitting idly by," amid more consumer-related problems, noted Merrill regional-bank analyst Sandra J. Flannigan. "Most are taking more proactive positions than they have historically."

The good news is that many banks are tightening their credit card chargeoff policies and marketing plans, and responding sooner to bankruptcies.

The not-so-good news is that there are significant differences in how they are doing it - with the probable consequence that some practices will turn out to be more effective than others.

The bad news, of course, is that personal bankruptcies are rising and consumer credit quality is deteriorating despite the ongoing expansion of the nation's economy.

All of this creates headaches for bank stock investors searching for accurate ways to compare and contrast how banks are handling the increased risk in consumer credit.

The Merrill study covered 32 banks ranging from $5 billion to over $300 billion in assets. Using the survey, the firm's bank analysts offer a list of major banking companies that appear to be the most careful players in terms of consumer credit.

They are: Bank of New York Co., Chase Manhattan Corp, Citicorp, First American Corp., Fleet Financial Group, Mellon Bank Corp., National City Corp., Northern Trust Corp,, Norwest Corp., Republic New York Corp., and Wells Fargo & Co.

But the study offered a decidedly mixed picture of consumer credit practices at banks.

For instance, 77% of banks surveyed said they respond immediately to bankruptcy notices. Among them were Bank of Boston Corp., Banc One Corp, BankAmerica Corp., and Citicorp.

At the same time, however, more than half the banks asked said they do not classify card accounts as "past due" until the bill itself is due, instead of recognizing deterioration from the initial billing date. Chase Manhattan, U.S. Bancorp, and PNC Bank Corp. are among those that have such waiting periods.

And this may not be so wise, the Merrill analysts said. The nation's consumers appear to be more heavily leveraged now than ever and the some consequences are beginning to appear. Most notably, personal bankruptcies accounted for 40% of all credit card losses this year, jumping 7 percentage points from a year ago.

"Bankruptcy is more widely disseminated than ever before," said analyst George M. Salem of Gerard Klauer Mattison & Co., New York. "There are more consumers who qualify for bankruptcy, and more of them looking for relief."

Mr. Salem and Ms. Flannigan agree that consumers are more comfortable to report personal bankruptcy than has historically been the case. Banks have begun responding to this, but, again, the results vary.

Only a third of the banks, including Fleet and Norwest, have moderated their card marketing efforts in order to enlist more reliable credit customers.

Banks whose card programs lack sophistication could end up soliciting customers "at the bottom of the barrel," thereby putting themselves at additional risk, said Charles Whitmann of Wheat First Butcher Singer Capital Markets.

Seeking to protect themselves competitively, most banks are not raising fees to deter delinquencies. Only a select few - including Wachovia Corp., National City and Banc One - use that method.

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