Hibernia Corp., which just last fall pronounced its credit quality problems dead, has been telling investors that problem loans may persist this year after all.

During a conference call with analysts last week, Stephen A. Hansel, president and chief executive officer of the $15.3 billion-asset New Orleans banking company, said the bank may have "slightly higher" levels of nonperforming loans in 2000.

"We are saying that we are willing to tolerate some nonperforming loans," Mr. Hansel said in an interview Thursday. "We do not expect a major increase, but people should not be surprised to see the average nonperformers rise this year."

Loan problems emerged at Hibernia last March, when United Companies Financial Corp. of Baton Rouge, La., filed for bankruptcy. The bank, which had a $33 million unsecured exposure to United, cut profit targets and raised reserves as a result. Later in the year, Hibernia reduced its portion of some of its large syndicated commercial credits, including those that caused the problems, and reduced its delinquency ratio to 0.46% of loans, from 0.60% in 1998.

But the credit problems took their toll. Shares of the company have dropped almost 40% from a midsummer peak, and now hover at their lowest level since 1996. Hibernia's stock was trading at $10 per share at midday Tuesday.

The company further tarnished its credibility with Wall Street late last year when it admitted that nonperforming assets would be up during the fourth quarter. Hibernia officials had indicated the company was on top of the problems in October, saying that it had written off the United loan and sold another $40 million in distressed credits.

At yearend, Hibernia had $88.4 million of nonperforming assets, representing 0.81% of its total assets. Nonperforming assets stood at $76 million, or 0.70%, at Sept. 30, 1999, and at $54.4 million, or 0.55%, at Dec. 31, 1998. Mr. Hansel said that keeping some bad loans on the books was "the best economic course for our shareholders."

"Because we feel the secondary sources of repayment are relatively strong in most cases, we are not going to be as willing as we were before to dispose of these credits at distressed market levels," he said, adding that two large credits - a health care company and a mortuary - make up more than half of the total nonperformers.

Even with the nonperforming loans, Mr. Hansel said he is comfortable with analyst estimates that the company will earn $1.30 per share this year. Hibernia earned $1.11 per share in 1999.

But Jeff Davis, of J.C. Bradford & Co. in Nashville, said that because of the October announcement, the company is going to have trouble convincing investors that the problems are fixed.

"Hibernia was one of many companies that had what was perceived to be a one-time event," he said. "Now the company is going through a second bout of the flu, and they are not going to have much credibility when they say they are healthy again."

"It is fair to say that was not what people wanted to hear," said Christopher T. Kelley, an analyst with Morgan Keegan & Co. in Memphis. "Credit quality is the issue that sends people running from bank stocks, and they do not come back until they are sure things are all right again."

Still, despite its problems, some analysts are warming to Hibernia. John B. Wimsatt, an analyst with Friedman, Billings, Ramsey & Co. in Arlington, Va., said the stock price is approaching Hibernia's $8 per share book value. "Hibernia is so cheap, it has to be something to look at," said Mr. Wimsatt, who rates the stock as a "buy."

The company's retail operations also had a strong year, with deposits growing 9%, to $11.9 billion. In fact, Hibernia passed Bank One Corp. for the deposit-share lead in Louisiana.

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