Slower economic growth, slackening revenues, declining loan quality.

These are what some Midwest bank chief executives expect in the year ahead.

Though they stopped short of predicting a recession, these bankers said the robust revenue growth of the last five years is likely to taper off.

Nineteen ninety-nine, they said, is likely to be a time of belt- tightening rather than of investing in new businesses.

Trading losses in foreign markets, including Russia, Asia, and Latin America, ruined results at several money-center banks this year but left most regional banks untouched.

But some Midwest bankers are readying themselves for the aftermath. "We see a slower economy. Everyone sees a slower economy," said Frank V. Cahouet, who will retire as chairman and chief executive officer of Pittsburgh-based Mellon Bank Corp. at yearend.

Bankers said they are prepared for a slackening economy because they are better insulated geographically and in terms of business diversity.

"Most people feel there's a greater probability of a slowdown than six months ago," said Richard M. Kovacevich, chief executive of Wells Fargo & Co. Mr. Kovacevich said his company's presence in rapidly growing western states, including Arizona, Nevada, and Washington, gives it an advantage. Still, "if the nation slows down, we'll slow down, too," he said.

If the country falls into a recession, Bank One Corp. of Chicago "will come out better than the rest of the industry," according to its chief executive, John B. McCoy.

Mr. McCoy, like other regional bank executives, has emphasized his company's very small exposure to foreign markets.

He is also more bullish than most about the economy. "If there is a downturn, it will be very, very quick," he predicted. Bank One will expand earnings 15% a year over the next two years, and earn 20% on equity, he said.

Raj Aggarwal, a professor of finance at John Carroll University in Cleveland, said Mr. McCoy's predictions may be overly optimistic.

"My view is, the economy is going to slow down. I don't think it's going to be a disaster, but those are pretty aggressive earnings increases," Mr. Aggarwal said.

Mr. McCoy said his profit estimates are conservative and assume just a 2% increase in gross domestic product.

David A. Daberko, chairman and CEO of National City Corp. in Cleveland, said he expects sluggish loan growth for the industry. He added that it is impossible to predict how many borrowers will default in a downturn. "Asset quality is the wild card," he said.

Overall, the comfortable era of double-digit profit increases could be over, he said. "It will be a more difficult environment for earnings growth," Mr. Daberko said. "It will be tough for banks to get 10% income growth."

"Revenue growth has been the subject of more discussion than anything in the last six to eight months," said David Wagner, chairman and CEO of Old Kent Financial Corp. of Grand Rapids, Mich. "Growth is going to be a little thinner than people would like."

Competition for customers will increase, he predicted. "You have to sell harder than the guy across the street."

Bad loans are an ever-present threat, he added, saying "that's one thing about the industry that hasn't changed."

"Loan portfolios for most of the institutions out there are in excellent shape," Mellon's Mr. Cahouet said. "The balance sheets are good, and I think the management of these institutions has greatly strengthened over the last decade."

Even if regional banks are not directly hit by trading losses in emerging markets, stagnant economies overseas are likely to have an effect here. "You can't have what's going on in Asia, and you can't have Europe flattening out, and you can't have what's going on in Latin America without having some impact in the States. It's a reality check," Mr. Cahouet added.

Only Eugene Miller, chairman and CEO of Comerica Inc. in Detroit, held out hope for a strong 1999. "We see good loan demand continuing," he said. "I think there's a one-in-three chance we'll see a recession next year."

"These are remarkable times," Mr. Miller said. "Interest rates are going down as (business loan) volume is going up."

Mr. Miller said he was less certain about the outlook for a few years ahead.

"I don't think '99 is the issue for the industry," he said. "I think it's the year 2000."

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