After years of prosperity fueled by uninterrupted economic growth, many lenders are now preparing for a reversal of fortune.

Showing a surprisingly pessimistic outlook, more than two out of three small to midsize lenders expect loan losses, bankruptcies, and interest rates to rise next year, according to a fourth-quarter survey. Hardest hit, bankers said, would be health-care companies, start-ups, agriculture, and retail companies. As a result those industries were named the "least attractive" for lending in the new year, according to the survey by the Philadelphia consulting firm Phoenix Management Services Inc.

Though the findings remain relatively unchanged from the third quarter, they suggest that the economy's continued robust performance has done little to bolster the fragile confidence of bankers.

"It's almost as though there's schizophrenia out there," said Michael Jacoby, an executive vice president at Phoenix. "On the one hand, they're lending money - we still see there's competition in the marketplace. Lenders are aggressively bidding for deals. But they are cognizant and aware that there's change in the economy. The question is are they going to take appropriate action."

Overall, respondents said they expected to tighten credit standards and increase loan prices. Twenty-eight percent of lenders said they would tighten credit terms for new loans of more than $10 million, while 23% said they would increase the interest rate spread on new loans.

Allen Sanborn, president and chief executive of Robert Morris Associates, the banking industry's trade group for credit risk, said the survey's results are consistent not only with the membership of the group but with recent warnings from federal regulators.

"The criticized assets in the syndicated loan market have gone up in the eyes of" regulators, Mr. Sanborn said. "We don't see anything of a dramatic nature coming, but the sense is that the expansion is long in the tooth. We're nine years into a seven-year cycle."

Some believe an increase in bond defaults may be worrying bankers. Leo Brand, a structured finance debt analyst with Standard & Poor's, noted that 1998 carried an unusually high number of bond defaults - a clear signal of weakening credit quality. But, he said, "the pace of default is slowing down. I expect a large number of defaults next year but nowhere near what we had this year. We had so many traced to Asian crisis, and that's seemed to run its course."

The Phoenix survey polled 102 institutions by mail during late October and early November. The survey, which aims to gauge the lending outlook for the following six months, included 62 commercial banks, 26 commercial finance companies, and 13 other lenders.

Respondents tended to be relatively small. Only 7% said they consider money-center banks to be primary competition, compared with 64% that said either regional or local banks were their main competition.

Michael H. Rushmore, head of syndicated finance research at Bank of America Corp. in Chicago, believes the outlook for lenders - especially national banks - is far more positive than the survey suggests.

"What drives bankruptcies is the economy," he said. "If the economy continues to perform at the level it's performing today, then I wouldn't expect to see any increase in bankruptcies."

Mr. Rushmore said the survey suggests a "bearish view of the economy." He disagrees and points to loan statistics for leveraged companies - the kind most prone to bankruptcy. Debt-to-cash-flow leverage for the riskiest syndicated loans has dropped at least 17% since 1996, to 4.4 to 1, from a peak of 5.3 to 1, according to Portfolio Management Data.

"We are seeing the lowest financial leverage at a time when the economy is purring along beautifully," Mr. Rushmore added. "I've never been more bullish on the quality of deals being done."

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