Wall Street analysts and Washington regulators agree that the results of the Shared National Credit Exam will indicate that troubled bank loans are rising, but they disagree in what seems a “half full-half empty” way over the severity of the increase.

“Everyone should expect the level of problem loans will rise at a rate at least equal to the rate of increase experienced last year,” said David D. Gibbons, the deputy comptroller for credit risk at the Office of the Comptroller of the Currency, in an interview Monday. While the poor performance in last year’s exam can be blamed on inadequate risk management, banks that have gotten better at managing risk must now contend with an economic slowdown that is causing loans to sour, Mr. Gibbons said.

But Lori Appelbaum, a bank analyst at Goldman Sachs Group Inc., said the magnitude of the increase may not be as bad as it could have been had banks not been actively managing their portfolios by selling problem credits to the secondary market.

In a research note issued Thursday, Ms. Appelbaum estimated that the proportion of loans classified as problems will rise about 30%, to more than 10% of outstanding shared national credits. The increase was 51% last year, but 30% would be a significant rise, roughly matching last year’s gross terms.

“The risks in the system are well understood by both the banks and the regulators and the banks are taking proactive steps to resolve problem loan issues,” wrote Ms. Appelbaum, who based her opinions in part on information gathered during meetings with Mr. Gibbons and other regulators.

“In that the industry is well past the ‘shock, denial, and anger’ stages of the commercial credit cycle and into the ‘bargaining and acceptance’ stages, it is likely that there will be no major adverse changes to arise from this year’s exam,” she wrote.

Mr. Gibbons said banks, in a reaction to last year’s dismal exam results and under more pressure from regulators, have improved the classification of problem loans in their portfolios.

But the industry still has some problem areas in a number of industries, Mr. Gibbons said. He stopped short of identifying the worst sectors, though Ms. Appelbaum wrote that the telecom industry could prove problematic for the banks this year.

She said she expects regulators to enforce most of its downgrades in that sector, where the big lenders include Bank of America Corp., which has been involved in 92 leveraged telecom loan facilities, or about 1% of its loan portfolio, over the past six years, and FleetBoston Financial Corp., which had 85 telecom credits, or about 2% of its portfolio, over the same period.

The OCC, the Federal Reserve, and the Federal Deposit Insurance Corp. each participate in the yearly exam by sending representatives to examine the loan portfolios of large banking companies.

The examiners review and vote on all credits of at least $20 million that are shared by three or more institutions. Then they either pass the credits, or categorize them under one of four degrees of weakness: “special mention,” indicating a potential problem; “substandard loan,” showing a well-defined weakness; or the two most troubled categories, “doubtful” and “loss,” Mr. Gibbons said.

Michael Mayo, a bank analyst for Prudential Securities, said that this year “the banks are more on guard to the creditors’ scrutiny.”

After last year’s exam unveiled so many problem credits, top management at the banks sent the word down to the line officers that any surprises this year would not be tolerated, so most institutions probably put borderline credits on watch before their hands were forced, he said.

As a result, banks did a good job reducing their problem credits, Mr. Mayo said. But regulators started looking at the portfolios a few months ago, and that could lead to untoward developments from credits that have gone bad during those months, he said.

However, Ms. Appelbaum wrote that this year’s exam probably will not reveal any large credit disasters.

After last year’s exam, banking companies like Wachovia Corp. and AmSouth Bancorp. had to write down troubled exposures closer to market levels and as a result built up their loan-loss reserves, but those companies should be better off this year, she wrote.

Reserves at Bank of America, First Union Corp., Comerica Inc., and Bank One Corp. are at the low end of the industry’s range, probably because they have all been selling distressed positions, Ms. Appelbaum wrote.

Pamela Martin, the director of regulatory relations and communications at RMA, the trade association of bank loan and credit officers, said that “everyone expects that the number of classifieds will increase,” because of the slowdown in the economy.

“The secondary market is very, very robust at this point,” and the strength of the secondary market has allowed banks to act quickly to control their risk so that losses are not as sharp as they were in 1990 or 1991, Ms. Martin said.

But given what has happened to the economy, it is inevitable that the number of classifieds will go up, she said.

The results of this year’s exam are expected to be released within the next month.

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