Stung by billions of dollars of bad loans in Saudi Arabia and other Arab oil states, American banks are retrenching in this Middle East financial center in what some Arabs and westerners consider a suspect and shortsighted move.

As moving companies do a brisk business packing western bankers and other departing expatriates, the local Gulf Daily News recently published a front-page interview with Bahrain's finance minister. It carried the headline: "Stay-Away Warning to Hit-and-Run Banks."

The minister's ire was provoked by the departure of two more foreign banks from this small island state, which in the booming 1970s had counted on so-called offshore banking units to provide jobs at a time when its oil production was rapidly running down.

Such public displays of Arab resentment against foreign banks matches, in a way, what some financiers here say is overreaction by the banks' headquarters in the United States.

While a relative handful of the approximately 70 American and foreign banks represented here have closed their offices, most are greatly reducing their staffs. Much to the consternation of their employes here, U.S. banks' headquarters appear to have cut their local operations to the bone, although, in the words of one European banker, "even in bad times there are good deals to be had."

At risk, these bankers and Arab analysts say, is the future American role in an area that contains more than half the world's known oil reserves.

One veteran Middle East observer here said, "Present decisions can produce unsuspected consequences because of corporate America's short fuse and the Arabs' legendary long memories."

"This year's dramatic drop in oil prices was the last straw," said an American banker who, like others interviewed for this article, requested anonymity. "The decision makers back home who are cutting credit lines seemingly reflect the same mood as the rest of the American public for whom, in oversimplified comic-book fashion, all Moslems are Arabs and all Arabs are terrorists. They should know better."

When the Saudi and other gulf economies seemed to be expanding, he recalled, bank headquarters happily lived with large risky loans, the seemingly endless war between Iran and Iraq, terrorism and even slowly declining oil prices. Above all, he said, they knowingly ignored the dangers of doing business in a part of the world where the legal system, based on Islam, provided few of the constraints on debtors that are taken for granted in the West.

Attracted in the 1970s by the petrodollar bonanza that was flooding into Saudi Arabia and the smaller Arab oil-producing states, banks, led by such American giants as Citibank, Chase Manhattan and Bank of America, turned Bahrain into a mini-Wall Street.

Bahrain, with its traditional tolerance of western ways, is a short flight from Saudi Arabia, and lacks many of the kingdom's constraints on business dealings and social life.

By 1983, when government-led spending dried up and massive projects were completed, more than 70 foreign banks, headquartered from Texas to Tokyo, were doing business here.

In a series of interviews last week, bankers estimated that their overall operations here ended up losing more money than was made during the boom years. There was the common theme that in many cases the banks deserved what they got.

When the Bahrain branches accounted for the banks' biggest worldwide profits, headquarters pushed for more.

Now that Bahrain's offshore banking is becalmed, bankers put the losses conservatively at between $1 billion and $2 billion.

By the end of this summer, these bankers estimate their staffs will be a third of the number of people employed four years ago.

They privately criticized their headquarters for indulging in what one called the "same hysterical stampede" out of banking operations that characterized their decision to come here.

"No American bank is doing any new business. It's almost as if they were on strike," an American banker said. "We're all just trying to collect bad debts and cut back staff as we succeed."

Bankers swap boom-time horror stories about headquarters ordering massive corporate lending despite Saudi Arabia's dismal record on paying bills for prolonged periods in the 1950s, 1960s and 1970s.

American banks often sent inexperienced staffers, who had been out of business schools only a few years. One seasoned banker said, "Business was growing here at such a rate that we couldn't get enough qualified people despite tax breaks, free housing, generous rest and recuperation holidays and other perks."

"Banks were giving $130 million in syndicated credits to contractors in Saudi Arabia without having received even $130 in repayment," a chastened banker recalled. "No one looked at a borrower's background. We were all blinded by the country's $120 billion to $130 billion in annual oil revenues."

Some bankers said many problems involving trying to make debtors pay loans could have been avoided with better understanding of Saudi culture.

Another banker said, "If you push Saudi debtors, soon they won't even see you, and they can make sure you don't get a visa to let you into the kingdom. More often than not, if they do agree to talk, the meeting will be in London."

In such circumstances, Swiss banks, according to financial sources, are doing good business investing the private fortunes of some of the men who are most in debt to other western banks. A current joke has two representatives from different departments of a big American bank bumping into each other as they emerge from a major debtor's office. One is trying to collect funds that his colleague has just signed on to invest.