A formidable spring stock rally raised the overall market value of the nation's 100 largest banking companies by 14.4% in the second quarter.
The two largest banks in market terms, Citicorp and NationsBank Corp., both soared beyond $50 billion in capitalization, in the first instance of U.S. banks reaching that rarefied region.
"While some people still argue that bank stocks are a flash in the pan, we seem to be in about our fourth year of pan flash," noted Robert B. Albertson, director of U.S. bank research at Goldman, Sachs & Co. "And I would not be surprised to see another 25% upward move in the market cap of the industry over the next 12 to 15 months."
The total value of the common stock of the 100 largest banks was $681.3 billion on June 30 after an impressive jump of $85.5 billion in value between April and June.
(A complete list of the top 100 banks and their market value appears on page 25.)
Indeed, the second quarter was the 10th straight in which these banking industry leaders added capitalization. The last time the industry's market value fell was in the second half of 1994, amid a series of interest rate increases by the Federal Reserve.
The just-completed quarter ranks as the second best during the industry's remarkable two-and-a-half-year rally. Only the 15.2% gain during the third quarter of last year was better.
Remarkably, Citicorp and NationsBank, valued at $55 billion and $50.1 billion respectively on June 30, now possess more market capital than the 100 largest banks had in total-$101.4 billion-six and a half years ago during the industry's worst credit crisis since the Great Depression.
Earlier this year, Forbes Magazine ranked Citicorp 18th in market cap among all U.S. companies, a list headed by such market heavyweights as General Electric, Coca Cola, Microsoft, and Intel.
Among the largest banking companies, BankAmerica Corp., which split its stock 2-for-1 on June 2, enjoyed the largest gain-up 27% to $45.5 billion in value. It claimed third place from Chase Manhattan Corp., which enjoyed only a 2.2% gain in the quarter to a value of $41.2 billion.
The most notable exception to the industry's strong run was Wells Fargo & Co., which has confounded investors with the trouble it has encountered in its acquisition of First Interstate Bancorp. Wells' market value fell by 15.2% to $24.6 billion. Wells dropped to seventh place from fifth in market value among top banks.
Wells shares were downgraded Wednesday to "hold" from "buy" by industry analyst Carole S. Berger of Salomon Brothers Inc., "due to very disappointing trends." She also "radically reduced" earnings estimates for the company.
Among the top performers of the quarter, Synovus Financial Corp. jumped 40.4% in market value to $4.8 billion, and Chicago's Northern Trust Corp. rose 29.4% in value to $5.4 billion. Norwest Corp., Minneapolis, increased 21.6% to $21.1 billion.
Despite their advances, however, most banks still trade around a 30% discount to other stocks on a price-earnings basis, and some analysts think that may be the key to the banks' ongoing popularity.
"The institutional portfolio managers have all this money coming into their funds, they have to put it to work somehow, and their question is, 'What stocks should we buy?"' said analyst Raphael Soifer of Brown Brothers Harriman & Co. "And relative to other stocks, some of these banks continue to look attractive."
