Global Crises Move Some Investors to Regionals

In the wake of last week's market tumult, investors are apparently shying away from big banks with global exposure in favor of more stable regional banks.

Bank stocks in general rebounded in Friday's market as fears of fallout from currency meltdowns in Southeast Asian and Latin American markets eased. Regional and smaller banks, however, appeared to gain more ground.

Superregional companies like First of America Bank Corp., First Union Corp., and CoreStates Financial were the biggest gainers. First of America stock rose 81.25 cents to $55.75, First Union was up 93.75 cents to $49.0625, and CoreStates jumped $4.75 to $72.75.

Bigger banks-particularly those with substantial exposure to the Southeast Asian market such as Citicorp and Chase Manhattan Corp.-rose minimally.

The Standard & Poor's bank index rose 1.37%, while the Dow Jones industrial average advanced 0.82%. The Nasdaq bank index increased 0.68%, and the S&P 500 rose 1.22%.

When the turmoil in Southeast Asia and Latin America occurred "the entire market was pulled down," said bank analyst Edward Narjarian of Wheat, First, Butcher Singer. "But now we are seeing the regional banks come back more substantially."

"There could be a flight to regionals in this environment given the selloff in the broader market," Mr. Narjarian continued. "Everything that we have seen in the last week has been related to international problems, but regional banks really are not at risk in regard to international exposure."

Timothy Willy, an analyst at A.G. Edwards & Co., St. Louis, agreed, noting that small banks were not hit that hard either.

"We think people got carried away," said Mr. Willy. "Small banks have very little exposure to what is going on in Asia, at least on a near-term basis. People are starting to realize that now."

Raphael Soifer, an analyst who follows large banks for Brown Brothers, Harriman & Co., said it was too soon to say if the global problems had effectively put a lid on stocks of these companies.

"It depends how the international situation plays out," he said Friday. The Mexican peso crisis of early 1995, to which it may prove comparable, "turned out to be a very good buying opportunity for the international banks," he said.

"It is too early to say if this situation will work out that way," Mr. Soifer said. "It depends on how lasting the effects are and how broad they are."

The common factor for all emerging markets is their dependence on capital inflows, he said. "In 1994 and 1995, those flows were stopped or even reversed for a quarter or two, but the world survived that.

"If that turns out to be the situation again, then it will again be a buying opportunity," Mr. Soifer said. "If the effects on capital flows are more lasting, as happened during the 1980's, then that is a horse of an entirely differently color.

"Nothing we have seen so far says to me that we are headed down the path of the 1980s," he said. "On the other hand, it can't be ruled out, and we may not know the answer to this question for quite some time."

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