Anxieties about bank credit quality are continuing to surface among bankers and analysts.

Citing "genuine concern over the direction of credit standards," Robert Morris Associates, the national association of bank loan and credit officers, last week issued an advisory it termed a "wake-up call."

Credit concerns also prompted frequent questions and discussion last week in New York during the 25th annual symposium of the Bank and Financial Analysts Association.

The concerns are being expressed at what economists think may be a turning point for business conditions, with the robust economic expansion of last year downshifting toward either a significantly slower pace of growth or a recession.

Robert Morris, in a memorandum to bank chief executives, urged no compromise on asset-quality goals, reminding them that "loans extended during competitive good times with easier terms come back to haunt us as problem assets during economic recessions."

Martin "Dev" Strischek, president of Robert Morris, asserted that bankers must "guard against any unwarranted easing of credit standards, even in the face of intense competition, good capital positions, the desire to achieve higher earnings, and a strong economy."

Mr. Strischek is executive vice president of Barnett Bank of Palm Beach County, West Palm Beach, Fla.

Much of Robert Morris' concern stems from results of the Federal Reserve's regular survey of bank credit officers.

In the Fed's November survey, 21% of respondents said they had eased credit terms on large loans; 6.8%, on middle-market loans; and 5.3%, on small business loans. A further 2% said small business credit terms were being "eased considerably."

The Fed's January survey indicated banks were still easing credit terms, although at a somewhat slower rate.

Robert Morris said in a "hot topic" report that loan officers say only a handful of banks in a region typically take the lead in dropping standards but that others must then either match those terms or face a loss of business.

In a dramatic anecdote, Robert Morris said the president of a super community bank had reported losing a borrower who had been a customer of his institution since 1901. The customer left for a larger bank that waived audited financial statements and personal guarantees on a $5 million revolving loan.

At the bank analysts' meeting, questions focused on the credit quality of card portfolios, which have mushroomed in recent years and been a leading earner for banks.

John Coffman of Credit Strategy Management, a consultant to banks, said he does not foresee "gloom and doom." But he cautioned that crucial factors underlying recent widespread success in the credit card sector are changing.

The "tremendous card growth of the 1980s and early 1990s was based on a huge increase in the prime population group eligible for cards," he pointed out. Specifically, he said, the 25-44 age group grew by 18 million.

In addition, he said, the bank card industry simultaneously developed impressive new methods of identifying, tracking, and managing risk. That contained losses and permitted enormous expansion of the business.

"But high growth can mask a lot of problems," Mr. Coffman said, "and the risk tools can only go so far" when the demographic fundamentals are shifting.

Growth in the 25-44 age group is projected to fall to 2.5 million over the next decade. As a result, the growth of an individual card issuer's portfolio must come primarily at another issuer's expense.

"It's going to be a zero-sum game of taking customers away from each other," Mr. Coffman said, and that "cannot help but have a negative impact" on delinquencies and losses.

This scenario could well become apparent during the next economic slowdown, but Mr. Coffman said it is extremely difficult to predict the degree of potential increase in concentrations of problem credits.

That is because "it's not so much that the card issuers are putting on horribly worse credit," he said, as that higher delinquencies and loss ratios will result from greater attrition of good card customers and lesser use of credit lines.

"In the future, bank card operators are going to be very happy with a 10% attrition rate," Mr. Coffman said, predicting that card operators may have to replace 15% to 20% of their accounts a year as customers migrate among providers.

That raises the specter that less adept card operations will lose their better customers and be left with weaker ones, a prescription for both lower revenues and higher losses.

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