Lenders expect stronger loan growth, easing credit, and flat or decreasing loan prices during the next six months, according to a new survey.

The findings, to be released today by Phoenix Management Services Inc., reflect a dramatic, albeit expected, turnaround from the low confidence levels found at the end of 1998.

The quarterly survey of 86 banks and specialty lenders was conducted by mail last month. Its findings contrast sharply with predictions three months earlier of bankruptcies, defaults, and tightening credit.

Michael Jacoby, a partner at Chadds Ford, Pa.-based Phoenix, said lenders pulled back in the third quarter, examined portfolios, and tightened credit. By the end of last year, the global economic crisis that had triggered those moves had dissipated, but skittishness had not, he said.

"What happened in the late summer and in the fall of 1998 could be viewed as a temporary blip of sorts," Mr. Jacoby said. "But I'm not sure it was a short-lived response from lenders. Folks certainly at the time were in somewhat of a retrenchment mode."

But he added, "This survey shows those events are behind us."

In fact, most lenders are predicting another booming summer of business. In the latest survey, 82% of lenders expected commercial loan originations to large companies to either remain the same or increase, compared to only 60% in the fourth quarter.

"I can see it holding steady, but I can also see it picking up," said Sheila A. Howell, an assistant vice president of loan sales and syndications with U.S. Bank in Minneapolis.

Already, U.S. Bank's originations team is syndicating loans for small manufacturers-what Ms. Howell calls the bank's "bread and butter." Some 81% of lenders in the survey picked that sector as the most attractive for loan growth.

The rosy outlook is much the same at the nation's biggest lenders. Michael Rushmore, a loan market analyst for BankAmerica Corp. in Chicago, said he is forecasting substantial growth in the leveraged loan business, the most profitable corporate loan market for banks.

That projection "reflects the combination of pent up M&A transactions that were sidetracked by financial disruption of the fourth quarter," Mr. Rushmore said. "There's at least two quarters of robust leveraged loan volume on the horizon."

Part of the reason for the bullish predictions: Pressure on pricing is easing. In the most recent survey only 29% of lenders said they planned to increase loan prices compared to 45% in December.

Three out of four lenders surveyed expect to maintain or relax credit through new loan structures, compared to 59% in the previous quarter.

For big banks, that means aggressively pursuing the financing of merger and acquisition deals. But, said Mr. Rushmore, most banks will require bigger equity contributions to offset bank risk.

"Banks recognize that we're in year eight of the economic expansion," he said. "They're unwilling to make substantial bets."

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