An impressive summer stock rally propelled the total market value of the nation's top 100 banking companies above the $500 billion mark for the first time.
And the rally has extended into autumn. Bank stocks rode the wave on Monday as the Dow Jones industrial average finished above the historic 6,000 mark for the first time.
The market capitalization of the top 100 banks was $502.9 billion in aggregate on Sept. 30, according to data from SNL Securities. That was up $48.8 billion from June 30 - a 10.8% gain that made the third quarter the strongest period of the year for bank equities.
"What is truly amazing is that the banks are still not trading beyond their historic range" relative to other stocks, said industry analyst Robert B. Albertson of Goldman, Sachs & Co., New York.
While influenced by overall stock market trends, shifts in the industry's market capitalization telegraph how investors feel about banks' business strategies and management, as well as the economic conditions under which they are operating.
In general, analysts said the third quarter rally was nourished by the absence of any interest rate increase by the Federal Reserve, diminished credit quality concerns, continued good earnings, and the resumption of takeover speculation.
Since the fourth quarter of 1994, when bank stocks last were in a serious slump, the market value of the top 100 has increased by more than 90%. And capitalization is up more than 190% since the dark fourth quarter of 1991, when the industry was fighting the worst asset problems since the Great Depression.
"So much for banks hitting the cement," said Mr. Albertson, who sees a generally bright future. "I think the banks still have some way to go in profitability and in consolidation, with a possible upward revaluation of the industry," in price-to-earnings terms, he said.
New York's Citicorp again ranked first in market value among banks, with a Sept. 30 market worth of $42.8 billion, up 9.5% from midyear. Chase Manhattan Corp. was second, up 13.2% to $34.9 billion, and BankAmerica Corp. was third, up 8.4% to $29.5 billion.
Overall, 96 of the top 100 banks - a group that itself changes according to capitalization and mergers - enjoyed gains in market value during the third quarter. Percentage-wise, the top gainer was Citizens Bancorp of Laurel, Md., up 64.1%.
And whatever the fears about consumer debt, investors clearly still prize banks in the credit card business. MBNA Corp., the specialty card issuer in Newark, Del., continues to enjoy by far the highest market capital-to-assets ratio among banks.
The ratio signals how much investors are willing to pay for a stake in each dollar of a company's assets. With a Sept. 30 ratio of 55.5, MBNA's market value of $7.7 billion was equal to more than half its assets.
