Bank stocks have hit frequent turbulence recently on investor fears that the Federal Reserve will soon be forced to raise interest rates to muffle inflation.

Are those fears justified? Not judged by results from the recent past and not based on the current outlook, according to an analysis by Dain Bosworth Inc., a Minneapolis brokerage firm.

On average, bank and thrift stocks tallied gains on both a six-month and one-year basis after the Fed initiated credit-tightening cycles, although they did underperform other stocks in those periods.

"It seems safe to say that Fed tightening does not necessarily spell disaster for the equity markets, despite investors' current hypersensitivity," wrote bank analysts Ben B. Crabtree and R. Jay Tejera in a report on the industry.

But the analysts emphasized that the markets' keenness to stay abreast of economic developments may have altered the central bank's credit- tightening cycles during the past two decades.

The last three rounds of Fed tightening were shorter than earlier bouts, they pointed out. That may have been because the markets' reaction - especially that of the bond market - helped "bring about the desired economic response more quickly than in the distant past."

Still, Fed credit tightenings have a lagging impact on business conditions, they noted. The period required for such moves to jolt the economy and whether it has changed during the past 20 years are debated by economists.

Banks suffered their worst market setbacks in the stagflationary 1970s. After the Fed began tightening credit in early 1977, banks posted a six- month return of minus-13%, twice as bad as the minus-6.5% return for the Standard & Poor's 500 stock index during the same period.

Banks also underperformed the market for the full year after the 1977 Fed tightening, losing 14.9% while the market slipped 11.5%. Thrifts, on the other hand, posted a six-month gain of 2.6% and a one-year return of 5.8%.

But the situation was dramatically reversed during the tough anti- inflationary tightening begun in July 1980 under former Fed Chairman Paul A. Volcker.

Bank issues posted a six-month return of 10.8%, versus 18.8% for the wider market, then accelerated to an impressive 20.9% one-year return, leaving other stocks in the dust with gains of 14.9%.

Meanwhile, thrifts plunged 13% on a six-month basis and lost 15.3% on a one-year basis.

The most recent round of Fed tightening, begun in February 1994, was a decidedly mixed experience for bank and thrift investors.

In the six months after rates began rising, banks significantly outpaced others in the market, rising 3.2% while the S&P 500 fell 4.9%. Thrifts fell 1.4%.

But as rates continued to rise, bank stocks collapsed in the last quarter of 1994. One year after the Fed began tightening, bank stocks had fallen 5.0%, or more than twice as much as the 2.3% decline in the overall market. Thrifts went off a cliff, plummeting 13.2%.

The reaction of bank stocks to higher rates, or just the possibility of a Fed tightening, is a source of continuing frustration to industry watchers.

"In terms of earnings vulnerability, banks tend to be asset-sensitive and, therefore, inclined to benefit rather than suffer from rising rates," Mr. Crabtree and Mr. Tejera wrote.

The Minneapolis analysts think bank stock investors should remain calm about the possibility that another round of Fed tightening is on the way shortly - perhaps as early as the central bank's Sept. 24 policy meeting.

They argue that, "in anything but a booming economy," most regional banks and many of the thrifts they follow will show stronger earnings and dividends gains than the average industrial stock. Bank stocks are also far cheaper than industrial stocks, they noted, "which is a desirable combination in a nervous market environment."

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