Indicating improved confidence in the economies of Asia, loan syndications in the region almost doubled in the first five months of this year.

Much of the business was done by U.S. banks. Units of Citigroup Inc., Chase Manhattan Corp., and Bank of America Corp. were among the five top syndicators, according to Thomson Financial Securities Data Co., an affiliate of American Banker.

The top 25 syndicators for Asia arranged $15 billion of loans from January through May, up from $7.8 billion a year earlier.

Though a large portion of the loans went to Japanese borrowers, bankers said economic prospects for other Asian countries have improved.

"The outlook is definitely more promising," said Robert E. Fallon, managing director and head of Chase's Asian operations. "From what I see, deal-pitching in the syndicated loan market for both private and sovereign borrowers is coming back."

The growing strength of Asian borrowers has been driving down the interest rates they pay, cutting lenders' profitability.

Pricing on a $100 million loan to South Korea's LG Caltex Oil Corp., for example, was reduced last month to 120 basis points over the three- or six- month London interbank offered rate, from 150 points. The loan was originally expected to fetch a spread of at least 170 basis points.

Still, current rates are far above those in the mid-1990s, when many Asian borrowers were paying just 30 to 40 basis points above Libor.

Mr. Fallon attributed the jump in spreads since the mid-1990s to the withdrawal of many Japanese banks from Asian countries. "The Japanese banks are out, and they were the most prolific in terms of cutting spreads," he said.

He and other banking sources said pricing has become increasingly selective and depends far more on the specific borrower and risk profile than in the past.

Though spreads are tightening, banks are unlikely to resume their former practice of competing against each other on pricing, he said.

"Banks have become more sophisticated about how they allocate their capital and measure risk," Mr. Fallon said. "I don't think you'll see them returning to their old behavior."

Other recent deals include a $250 million, five-year loan for Kodak China Co., a joint venture of Eastman Kodak Co. and two Chinese companies, which is being arranged by Chase.

Bank of America is reported to be moving ahead with efforts to refinance a $200 million facility for China's Minmetals Capital & Securities, and has completed the two-year, $100 million loan for LG Caltex.

ABN Amro of the Netherlands, Dresdner Bank of Germany, and Paribas Group of France are also reported to be seeking a mandate to arrange a $50 million, five-year credit for Taiwan's Yangming Marine Transport Corp.

During the first five months of 1999, Chase more than quadrupled the value of loans it syndicated for Asian borrowers, to $1.3 billion. Citigroup syndications jumped 270%, to $2.9 billion.

In contrast, Bank of America's total dropped 20%, to $757 million. It did not comment, but analysts said the decline reflects cutbacks since last fall's merger of the old BankAmerica Corp. with NationsBank Corp.

Bank of America, the second-largest syndicator in the first five months of 1998, dropped to fifth place.

Others in the top five were ABN Amro, which tripled its syndications, to $981 million, and Dai-Ichi Kangyo Bank of Japan, where syndications soared 639%, to $856 million.

The amount syndicated does not necessarily reflect the loans outstanding carried on a lender's books. Syndicators sell much of what they arrange. Many participants in syndications are smaller U.S. banks seeking to diversify their portfolios, said Mr. Fallon.

The growth in syndications could very well lead to a rise in Asian loans on U.S. institutions' books. This total dropped 31% last year, to $56 billion, according to the Federal Financial Institutions Examination Council. No FFIEC data are available for this year.

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