Some investors are feeling as if they've climbed Mount Everest as bank stocks rose in the past year and a half - and they're beginning to wonder whether the air is too thin.

Concerns about higher interest rates and a sense that banks have reached a plateau have prompted some to examine other sectors for investment opportunities.

Indeed, last Friday, after a stronger-than-expected employment report, bank stocks dropped more than 1.24%, while broader stock indexes were flat.

But Keefe, Bruyette & Woods analyst David Berry sees more gains ahead for bank stocks. He argues that the stocks are appropriately valued relative to the overall market.

"In my conversations with investors I have the impression people are trying to reduce their weighting in the sector," Mr. Berry said. "From a historical valuation perspective," however, the time to flee the bank sector has not arrived, he said.

Among 24 of the nation's largest banks, the price to earnings ratio currently, on average, is well within the historical range since 1980, Mr. Berry contended.

The stock prices look even more attractive relative to next year's estimated earnings.

Mr. Berry said that since 1980 the price-to-earnings ratios of banks relative to the average price-to-earnings ratio of the S&P 500 - called the relative P/E - is about 58%, with a standard deviation of eight percentage points.

That means that two-thirds of the time the relative P/E multiple is between 50% and 66%.

At Friday's close, the relative P/E of bank stocks to the S&P 500 was 62%, which is within the range. The ratio could drop to 58% for 1997 because of faster earnings growth in the next year, Mr. Berry said.

In addition, the relative dividend yield for the same bank stock group is 1.59, well above the 1.29 average for the past 16 years.

Despite their superior gains of the last year, banks carry only a slightly higher than average price, he said.

Being within the standard range, however, has suggested to some a lack of compelling buys.

"The valuations look middle-of-the-road right now," said Tom Lefebvre, a buy-side analyst at Kemper Financial Services Inc.

On a relative scale, moreover, the run-up this year, as evidenced by the 8.4% gain in Keefe's bank index, has made bank stocks less attractive than they were late last year. Kemper has gone to market weighting from overweighting in bank stocks.

"I would like to see some better data to ascertain which direction the economy is going," Mr. Lefebvre said. "With the consumer being loaned up and bankruptcies high, things may be more difficult on the consumer side than people are paying attention to."

Mr. Lefebvre said investors are paying more attention to returns as opposed to valuations.

"Part of that has to do with the fact that we aren't in a fear cycle with banks," Mr. Lefebvre said. "People feel fairly comfortable with bank earnings for the next year or two, but that could prove wrong, which is one of the reasons we're maintaining a market weighting right now."

Judah Kraushaar, a bank analyst at Merrill Lynch & Co., where a shift to an underweighting on regionals in the first quarter led to some sector concerns, said one economic indicator his firm is watching closely is the slope of the yield curve.

Based on a study going back to 1950, Mr. Kraushaar said, bank stocks have outperformed the market 75% of the time after the yield curve steepens.

"The upshot is that if you think the yield curve will continue to resteepen you can expect relatively better stock performance," Mr. Kraushaar said.

And he, like Mr. Berry, believes 1997 could be a good year for bank stocks. He is especially bullish on Chase Manhattan Corp. and Republic New York Corp.

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