Banks are posting record earnings, and loan growth, after some dismal years, is once again brisk. But as commercial credit officers gather in Toronto for their annual powwow, concerns about the future are surfacing.

"There is a sense that times ahead will become increasingly difficult," said Dorothy Horvath, the new chair of the commercial lending trade group Robert Morris Associates.

"I haven't talked with a single banker in the last 90 days who is not seeing an increase in potential problem loans."

To be sure, the nearly 600 bankers attending the trade group's conference, which began Sunday and continues through Tuesday, have few obvious worries.

Business loans grew at a respectable if unspectacular 5.8% in the first eight months of this year, according to data from the Federal Reserve Bank of St. Louis.

And while there are clear signs that consumer loan quality has deteriorated, commercial lenders say they're getting ahead of any serious problems by tightening credit standards and employing new analytical techniques. The industry's mood, Ms. Horvath was quick to note, is basically upbeat.

Even so, Ms. Horvath - an executive vice president at National City Bank in Columbus, Ohio, and the first woman to lead the trade group - will offer notes of caution.

In a speech prepared for delivery today, she warns: "The measurements of credit quality today look almost too good. ... How bad it gets will be determined by your actions today and tomorrow."

She added that the stake are high. "Even a doubling of the loss rate for the vast majority of banks in the consumer portfolio would not translate into a loss," Ms. Horvath said. "It's the larger individual credits in the commercial portfolios that do that."

There will be plenty of advice for lenders about how to maintain the discipline Ms. Horvath is calling for.

James Gertie, a group credit officer at BankBoston Corp., will lecture on new techniques for managing the loan portfolio. In an interview, he said banks aren't doing all they can to protect themselves against possible defaults by their corporate clients.

"At this point in the cycle," Mr. Gertie said, "everyone starts to compete for the business through structure and pricing." He said lower prices and less rigorous structure could come back to haunt banks if their corporate customers run aground, though he emphasized that banks seem to be getting compensated appropriately for their risks.

"I have yet to find strong signals" about a downturn, he said.

Mr. Gertie said that having the conference outside the United States for the first time since the 1960's does send a strong signal about the internationalization of Robert Morris Associates, and about the credit culture of Canadian banks.

"It's a tribute to Canadian banks in terms of how far they've advanced," he said. "Every one of them has a state of the art portfolio analysis."

The BankBoston executive said that many conference attendees will probably attend to gather new analytics.

"Risk-adjusted return on capital, portfolio analytics and general risk management are all like anti-lock brakes: we hope they'll work, but we won't know until we walk away," he said.

Ms. Horvath said that easing the structure on some of the loans has created a dangerous situation.

"Some of the covenants structured today are virtually worthless because they have no trip-wires" she said. "You might as well not have some of these covenants because a company will be in bankruptcy before it sets off any of them."

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