Northeast banks report slowdown in loan problems

January 16, 1992|By New York Times News Service

It is too early to dance on banks' doorsteps, but recent earnings reports by several large banks suggest that the recession is loosening its grip on the Northeast.

While many banks in the region have been able to recover more quickly than the economy by sharply reducing interest rates paid on deposits and squeezing out other costs, they are also reporting fewer troubled loans, or at least a sharp slowdown in the growth of them.

Troubled loans -- those that are far behind in payments or are not expected to be repaid in full -- doubled and tripled at many banks as the economy turned downward in 1990 and 1991.

Gary Ciminero, the chief economist for the Fleet/Norstar Financial Group, said yesterday that declines in banks' problems with bad loans would make them more willing to lend "and alleviate the 'credit crunch' that exacerbated the region's economic downturn."

But Mr. Ciminero warned that it was too early to say that the recession was over.

Joel B. Alvord, the chairman of Shawmut National Corp., which owns Connecticut National Bank, the largest in the state, said he was "guardedly optimistic" that the region's economy would hit bottom in the first or second quarter of the year.

Mr. Alvord noted that the deterioration in the region's economy had slowed to the extent that Shawmut would soon announce a significant decline in its most severely troubled loans and higher fourth-quarter earnings.

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