A positive word from influential analyst Abby Joseph Cohen of Goldman, Sachs & Co. and a report that Merrill Lynch's fourth-quarter profits doubled helped lift bank stocks in early trading Tuesday, as broader indexes slipped.

The Standard & Poor's bank index was up more than 1% in early afternoon trading, as banks shrugged off a downdraft that sent the Dow Jones industrial average down at midday.

Ms. Cohen, who could not be reached to elaborate on her view, reiterated to clients that financial stocks would do well this year.

Since last May bank stocks have steadily lost value under a barrage of investor concerns - from rising interest rates to merger integration snafus. The S&P bank index has dropped 30% in that period.

Momentum investors are long gone from the sector, and some observers argue that bank stock prices have fallen so much that they now qualify as value investments.

Some of the hard-hit banking companies now have dividend yields exceeding 6% of their lowly stock prices. This list includes First Union Corp. and Bank One Corp.

The trick is to know when bank stocks have bottomed out. Last October, when the Standard and Poor's index of 31 banks fell to 550, a low for 1999, observers were saying bank stocks were attractive because of their low prices. But since then, the index has lost another 6%.

"We were saying a couple of months ago bank stocks were values," said Gerard M. Cronin of McDonald Investments in Cleveland. "But stock prices follow earnings. And the problem is, earnings estimates are still coming down."

Indeed, analysts have been slashing estimates on banks since the fourth-quarter earnings reports. Mr. Cronin and his colleagues have cut estimates on 12 of the 18 banking companies that McDonald follows, by an average of 3%. The doubts are the same as before: Banks will have a tough time sustaining earnings-per-share growth in a rising interest rate environment.

The bond markets have already factored in 50 basis points of hikes by the Federal Reserve Board. The board's policymaking Federal Open Market Committee meets again Feb. 2.

"We still have some degree of skepticism with our estimates because we don't know what the Federal Reserve is going to do and when," Mr. Cronin said. "And in that environment I don't see investors running back into bank stocks."

The market is bearish enough to give value opportunities the cold shoulder. In some instances, banks' earnings growth expectations are outpacing stock multiples. For example, the consensus estimate has FleetBoston Financial Group's earnings-per-share growth in the 13% range, but its stock is trading at about nine times 2000 earnings.

"It will take a reversal of the direction of interest rates to turn around bank stocks," said David Allaire, a co-adviser of the Imperial Bank Fund, a portfolio of bank stocks managed by Retirement Planning Co. in Providence, R.I. "For people that accumulate bank stocks and have a long enough outlook, they probably will make some decent money in the financial sectors. But until rates turn the other way, I don't think bank stocks will come around."

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