Major U.S. banks moved with a sense of urgency Monday to help South Korea out of its financial bind, and the stock market cheered them on.
The same multinational banking companies that suffered recent share- price declines because of Asian exposures rebounded. Chase Manhattan Corp. rose $2, to $108.6875, Citicorp was up $4.0625, to $126, and J.P. Morgan & Co. gained $2.1875, to $113.625.
"We're getting a bounce from indications that all parties are coming together," said James McDermott, president of Keefe, Bruyette & Woods Inc. "We're looking at a global solution with banks and governments participating."
The talks on Korea involved executives of Chase, Citicorp, Morgan, Bankers Trust New York Corp., Bank of New York Co., and BankAmerica Corp., along with investment bankers, Federal Reserve officials, and representatives of foreign banks.
Among the participants were vice chairmen William Harrison of Chase and William Rhodes of Citicorp.
After a morning session at the Federal Reserve Bank of New York, its president, William McDonough, made a terse statement without elaboration: "We are pleased with the progress made at this morning's meetings."
The group reconvened in the afternoon at J.P. Morgan & Co. Sources said the discussions revolved around both extending maturities on short-term obligations of South Korean companies and on a possible multibillion-dollar syndicated loan to provide that country with fresh liquidity.
The banks in Monday's talks released a statement saying they had focused on how to "augment" the release of funds by the International Monetary Fund and other government and official funding agencies.
"It is our firm belief that a market-oriented private sector financing initiative offers the best solution to Korea's short-run liquidity concerns and enhances the prospects of Korea's early return to the capital markets," the statement added.
"You don't want to be seen as dithering," said a source close to the talks. "Every day that goes by without some sort of decision leaves the impression that there are divisions among the players."
But the magnitude of the problem was sure to make any financial plan a challenge.
According to the latest data from the Bank for International Settlements in Switzerland, South Korea owes foreign lenders $103 billion, more than $70 billion of that in short-term borrowings of up to one year.
Comprehensive Federal Reserve data on a broad range of claims put U.S. banks' exposure to South Korea at $21.7 billion at the end of August. Although most banks have declined to break out their loans and other claims on South Korea, Citicorp is reported to have a total cross-border exposure of $2.3 billion, BankAmerica $3.2 billion.
Banks in major industrialized nations have come under heavy pressure from their governments to help bail South Korea out since a $57 billion package put together by the International Monetary Fund proved to be both inadequate and too slow in coming.
Sources speculated that any fresh lending would most likely be made available to the South Korean central bank, which would guarantee the borrowing and make the funds available to the troubled country's banks and corporations.
South Korea has been in turmoil all year, made worse by a heavy reliance on short-term borrowings and a decision by major credit rating agencies earlier this month to downgrade South Korean issues to below investment grade.
This is not the first time international banks have come together to discuss such an aid package.
In February 1995, U.S. and foreign banks cobbled together a $3 billion rescue for Mexico that would have been part of a broader program. That total was subsequently reduced to $1 billion at the request of the Mexican government, which felt it had sufficient short-term funding and preferred a medium-term loan.
A similar effort raised $1 billion for Argentina through a bond issue that same year.
One message coming out of Monday's meetings was a reaffirmation of long- term confidence in South Korea.
"We believe the Korean government and the IMF and other governmental agencies are taking the right actions to stabilize the situation," said a Chase spokesman. "We have been in Korea for over 30 years and remain committed to that market."
Even as bank stock prices surged-and not just those of the money- centers-the frequently bearish bank analyst George Salem of Gerard Klauer Mattison warned that a Korean bailout could "get banks into further quicksand."
"It is ironic," said David Berry, research chief at Keefe Bruyette. "Last week we were in a total panic about loan exposure and now we're going to create more exposure and feel good about it."
Mr. Berry found it encouraging that countries are working together and the loans would have backing from the Korean government and the global community.
But he said the challenges are not over. "The real effort is to get everyone to settle down and not want all of their money back at the same time," Mr. Berry said.
Among other bank stocks rising Monday were KeyCorp, by $1.375, to $70.625; Keystone Financial by $1.375, to $40.625; Mellon Bank Corp. by 93.75 cents, to $60.375; and PNC Bank Corp. by $1.375 to $55.875.
The Dow Jones industrial average had climbed 1.47%, its biggest gain in more than three weeks. The Standard & Poor's bank index was up 1.68%. The Nasdaq bank index increased by 1.24%, and the S&P 500 was up 1.80%.