Bank technology stocks have not enjoyed the kind of general advance that lifted the broader stock markets in 1998.

Bank mergers, year-2000 concerns, and the recent turmoil in the global financial markets have held bank-focused vendors in check.

"I do not think there are a lot of strong growth assumptions for selling technology to banks," said Stephen C. Franco, an analyst at Piper Jaffray Inc., Minneapolis.

"There will be development freezes going into effect starting in 1999," he said, particularly for projects that require integration with computer systems that pass their year-2000 compliance tests.

Of the banking and payment system suppliers most adversely affected by mergers and year-2000 concerns, Checkfree Corp. of Atlanta is "the most striking example," Mr. Franco said.

During the summer, Checkfree-the leader in bill-payment processing - sharply reduced its earnings expectations for 1999. Large, merging institutions pared back the marketing of on-line services, affecting Checkfree's revenue growth, company officials said.

Checkfree's announcement on Aug. 11 caused its stock price to drop 41% the next day, to $13.9375. It traded Friday at $17.8125, down 34% for the year.

"Checkfree has the best products out there, but their distribution channel (the banking industry) isn't helping them out that much," said Charles Wittman, an analyst at Wheat First Union.

Other electronic commerce stocks have had a rocky 1998, including Edify Corp., down 62%, to $7.0625: Sterling Commerce, down 10% to $34.5625; and Harbinger Corp., down 63%, to $7.

Credit Suisse First Boston analyst Bill Burnham said, "It would be a close race between Harbinger and Edify" for "dog of the year."

There are pockets of strong performance among bank technology providers, particularly in outsourcing, said Richard Weingarten, an analyst at Salomon Smith Barney.

As financial services companies increasingly turned over operations to outsourcers, Mr. Weingarten initiated coverage of Fiserv Inc., which is up 42%, to $46.625, and DST Systems Inc., up 38%, to $58.75.

Salomon Smith Barney already covered Bisys Group, which is up 49%, to $49.6875. Other financial outsourcing firms that did well include Alltel Corp., up 37%, to $56.125, and SEI Corp., 127%, to $95.25. By contrast, First Data Corp. of Hackensack, N.J., the biggest credit card processor, has seen its customer base consolidated through mergers. At $28.6875 a share, its stock is down 2% in 1998.

Adding to its burdens, First Data competes in the price-sensitive, national merchant-processing market with National Processing Inc., which is down 43%, to $5.625; and BA Merchant Services Inc., 1%, to $17.625. Those companies are controlled by National City Corp. and BankAmerica Corp., respectively.

"First Data has been a drag on the performance of the whole group," said Mr. Wittman, the Wheat First analyst.

National City is considering buying back its 88%-owned transaction processing subsidiary, which it spun off two years ago. A $252 million proposal to buy back BA Merchant Services, which was also spun out by BankAmerica in 1996, was rejected last month.

BA Merchant Services and BankAmerica hired outside financial and legal firms to advise and evaluate the offer.

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