It seems ever more likely that fallout from Southeast Asia will continue to hurt money-center banks' shares in the new year.
Since the big U.S. market selloff in October, rallies in bank shares have been doused repeatedly by fresh bad news from Asia. On Tuesday money- center shares plunged on news that Korea's stock market index had suffered its biggest one-day decline.
The big losers included Bankers Trust New York Corp., whose shares plummeted 5.85%; J.P. Morgan & Co., down 3.45%; Citicorp, down 3.29%; BankAmerica Corp., down 2.24%; and Chase Manhattan Corp., also down 1.29%.
The action had analysts and investors girding for more.
The problems in Southeast Asia "have taken years to develop and therefore won't be cured in a matter of weeks," said Scott Edgar, director or research for the Sife Trust Fund. "Clearly the trading revenues of the multinational banks are going to be negative."
George M. Salem, senior vice president at Gerard Klauer Mattison & Co., who was quick to identify trading as a trouble spot early in the quarter, said the worst is yet to come.
"We are in the eye of the storm," he said. "We could get a peak in the stocks because of yearend earnings, but most banks have previewed their earnings, which has already been calculated into the stocks. I think we are heading into our darkest hours."
The prevailing view, however, continues to be that U.S. banks eventually will shake off the Asian flu.
Indeed, Mr. Edgar has yet to cut his positions in money-center stocks because the turmoil overseas could eventually benefit them.
"We believe that there will be a flight to the larger multinational U.S. banks, just because they are the strongest banks in this turmoil" he said.
Hedge fund manager Jeffrey Miller of the Acadia Fund, however, isn't so sure.
Banks may do well on the deposit side, but if they made loans to companies that are dependent on Southeast Asian companies, those loans could turn bad because of systemic problems in Korea, Mr. Miller said.
Elsewhere Tuesday, shares of Interra Financial Inc. rose 6.03% as a result of merger speculation.
Market experts said the company's stock is still benefiting from U.S. Bancorp's agreement this month to buy Piper Jaffray.
"Interra is the hot takeover rumor du jour," said bank analyst Katrina Blecher of Gruntal & Co. "It has a great broker network and quite a bit of retail underwriting."
She said the Minneapolis company is cutting its overhead by merging the operations of its subsidiaries, Dain Bosworth, of Minneapolis, and Rauscher, Pierce & Refsnes, of Dallas.
Some market experts said that potential suitors for the company include Banc One Corp. or First Union Corp.
Ms. Blecher said, however, that potential suitors may be hesitant about acquiring Interra because of its "relatively small" portfolio of assets under management.
