The banking industry may be shrinking, but assets at the top 100 holding companies grew 4.7% in the 12 months ended June 30, according to the American Banker's midyear survey.

The 100 largest had assets totaling $2.41 trillion, compared with $2.30 trillion a year earlier. Their payrolls, moreover, increased by close to 30,000 employees.

The top 100 held 70.1% of U.S. banking assets, up strongly from 68. 1 % a year earlier. It was the first time in at least five years that the big banks' market share had grown by more than one percentage point.

Effects of Consolidation

Much of the growth, to be sure, reflects consolidation in the industry. As one company gobbles up a competitor and combines assets, an opening occurs for a smaller company to climb into the top 100.

Thus, BankAmerica Corp. - the biggest gainer by dollar amount - absorbed $72.9 billion-asset Security Pacific Corp. to maintain its place as the nation's second-biggest company, with $188.6 billion of assets on June 30. That's a big jump from $113.2 billion a year earlier, but still $30 billion behind Citicorp.

Meanwhile, Fourth Financial Corp., with $4.2 billion of assets, climbed two notches to become the 99th-biggest bank company in the nation. Consolidation at the top of the industry allowed the Wichita-based bank to creep into the top 100 list even though its assets fell slightly from $4.3 billion in June 1991.

Analysts said they have little doubt that most companies will continue to keep a close eye on fat.

|Not Natural Growth'

The 4.7% rise in assets at the top 100 banks "is not natural growth," said Lawrence Cohn, an analyst at PaineWebber Inc. "Consolidation is the bigger issue."

Just as San Francisco-based BankAmerica used the purchase of its Los Angeles competitor to retain its position as the second-largest company, Chemical Banking Corp. vaulted from sixth to third place as a result of its merger with Manufacturers Hanover Corp. Chemical's assets stood at $142.4 billion, a $68.3 billion increase over its position 12 months earlier.

Some other big jumps also were explained by mergers. Comerica Inc.'s 16-notch move to 26th place reflected the first-half purchase of its Michigan neighbor, Manufacturers National Corp.; Society Corp.'s 12-notch jump to 28th place came after its acquisition of Ameritrust Corp.; and Banc One Corp.'s 12-notch ascent to 10th place was a reaffirmation of the $48.4 billionasset company's commitment to an aggressive acquisition strategy.

Trading Assets Increased

Citicorp boosted its assets to $219.3 billion from $217.3 billion, mainly by increasing the trading account assets on its books. At fifth-ranked J.P. Morgan & Co., trading accounted for much of the company's $10.5 billion jump in assets, to $107.5 billion. However, the mergers that created the new Chemical and NationsBank Corp. caused Morgan to slip from fourth Place to fifth.

"Most of the asset growth you've seen is either securities or interbank deposits and trading account assets," said Christoph Kotowski, an analyst at Oppenheimer & Co., reflecting on the across-the-board rise.

Profits Also Were Up

The good news, analysts pointed out, is that profits at the largest holding companies rose along with assets. The top 100 companies earned $9.6 billion in the second quarter of 1992, up from $5.2 billion a year earlier.

Again, little of that improvement came from the industry's core lending business. The Profits in the first half came primarily from the spread between low-interest deposits that banks took in and higher-yielding government securities that they bought with the cash, according to Bruce Herring, an analyst at Fidelity Investments.

"Banks are getting paid a lot of money to take in deposits and lend them to the government," he said.

Some Regions on the Mend

The data also show signs of recovery in certain regions.

New Jersey's Midlantic Corp. showed the greatest turnaround in credit quality, cutting its first-half loss from $438 million one year ago to $21 million on June 30.

Another company with a big New Jersey business, National Westminster Bancorp, edged into the black with a six-month profit of $66 million after a loss of $276 million in the first half of last year.

"Last year banks took heavy loan-loss provisions," said John Leonard, an analyst at Salomon Brothers Inc. "This year, there have not been a lot of new problems."

The biggest profit machine this year has been Morgan, which reported net income of $684 million in the first half of 1992. The New York-based company edged out Bank-America, the year-earlier leader, which fell to third place with $543 million of profits.

NationsBank Corp. was runner-up, more than doubling its six-month income to $561 million after taking fourth place a year earlier.

Despite the overall growth in payroll numbers, employment figures show continuing tight expense control at most companies. Banks that did not participate in the merger boom tended to cut back dramatically.

Citicorp took the honors for the biggest reduction in number of employees, paring its work force from 99,145 to 83,000 between June 1991 and June 1992, or 16%. First Interstate Bancorp dropped its payroll by 5,691 employees, or 17%, to 27,626.

The list of best-capitalized banks changed little during the year ended June 30. Republic New York Corp. continued to hold the No. I spot in the risk-based capital rankings, reporting a total risk-based ratio of 28.72%. At the end of June, 88 of the top 100 banks had total risk-based capital over 10%, well above the 8% minimum.

Ranked by leverage capital, which measures Tier 1 equity capital against average assets, National Bancorp of Alaska came in first with a ratio of 12.27%.

First City Bancorporation of Texas finished last in both risk-based and leverage capital ratios, with a risk-based ratio of 2.08%, down from 4.86% a year earlier, and a leverage ratio of 0.67%, down from 1.69%.

BankAmerica was the only bank with more than $10 billion in capital at the end of the second quarter. It nosed ahead of Citicorp, which had been tops a year earlier.

First American Bankshares Inc. slipped furthest overall, as measured by all categories of rankings compiled by this newspaper. The Washington, D.C.-based company, which is on the auction block, fell 12 notches to 77th place, as measured by total assets, and dropped to 83rd place from 58th in total capital.

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