The market value of the nation's top 100 banking companies rose 7.5% during the second quarter, to $1.07 trillion, but the record figure cloaks some important trends.

While large, globally oriented banks chalked up big gains in capitalization, many regional banks did not fare nearly as well.

Big banks extended their remarkable comeback from last fall's crisis in global markets. Regional banks' gains were limited by worries about higher interest rates.

New York's Citigroup Inc. tallied an 11.3% gain and strengthened its standing as the nation's most highly capitalized banking company, valued by investors at $160.5 billion on June 30. J.P. Morgan & Co., was up 13.9%, to $24.9 billion. (See table on page 21.)

Companies being acquired had predictably big surges in value, but some that have unveiled acquisitions suffered serious erosion.

Amsouth Bancorp. plummeted 24.5%, to a value of $4 billion, after announcing plans to buy First American Corp. of Nashville. It is the largest deal the Birmingham, Ala., company has ever attempted.

"Amsouth had been seen as a possible seller rather than a major buyer. Some people obviously used this announcement as a reason to sell the stock," said Gerard Cassidy of Tucker Anthony Inc. in Boston.

Then there was First Union Corp., whose disappointing earnings outlook in the wake of several major mergers triggered a $6.1 billion loss of market capitalization-an 11.8% slide, to a value of $45.6 billion.

"They are paying the price of disappointment at a time when most investors are looking for instant gratification," said Frank W. Anderson of Samco Capital Markets Inc., a Dallas money management firm.

Can one of the nation's largest banking companies really lose over $6 billion of value in a single quarter?

"In this market, probably so," Mr. Anderson said, "because valuations have gotten harder and harder to assess. Certainly, First Union has a very good franchise, but it has become a show-me stock."

A pair of one-time factors also played big roles in enhancing the industry's capitalization gain from April through June.

Deutsche Bank AG's June 4 acquisition of Bankers Trust Corp. removed Bankers Trust, which had been the 25th-largest in market capitalization, from the roster.

The percentage change in the growth rate of market capital was adjusted by removing Bankers Trust's $8.5 billion from the first-quarter numbers. Bankers Trust was replaced in the top 100 by F&M Bancorp. of Kaukauna, Wis., which was ranked No. 100 on June 30, with a market value of $608 million. The adjustment elevated the second-quarter growth rate for the entire sector by 0.94%.

A similar effect will occur when Republic New York Corp., ranked 28th on June 30, with a value of $7.2 billion, is acquired by HSBC Holdings PLC of London. That planned combination was announced on May 11.

Considerably more important than the statistical shift, however, was the Federal Reserve's announcement on the afternoon of June 30 that it would raise its key short-term interest rate by only a quarter percentage point and adopt a neutral stance on further rate hikes.

Rightly or wrongly, the Fed's move was viewed by investors as an effective cap on rates, and it ignited a huge quarter-ending rally in banking and financial services stocks that magnified market capitalization levels.

"The biggest trend of the quarter was the rate rise," Mr. Cassidy said, particularly with the long period of market anticipation that led up to the Fed's action.

While influenced by overall stock market trends, shifts in the banking industry's market capitalization reflect investor sentiment about banks' business strategies and management, as well as the risks they are perceived to face in the current economic environment.

Market capitalization is calculated by multiplying a company's outstanding common shares by the price per share at the end of the quarter.

Notably, U.S. banks, while not the world's largest in assets, have higher market valuations than banks elsewhere, because they produce higher returns on assets and are seen by investors as more efficient.

Large banks' value levels generally did well in the second quarter, because their capital markets operations were perceived as strong performers as financial markets continued to recover from the damage of last fall. Regional banks were dampened by rate hike concerns and a dearth of merger speculation until late in the quarter.

And in the era of banking consolidation, market value levels are an aid in predicting the future.

"At the end of the day," Mr. Anderson said, "the market capitalization tells you, more than anything else, whether a company is going to be remain independent or will eventually be acquired."

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