Pressured by overcapitalization and market uncertainty, stocks of many recently converted thrifts are cheaper than at any other time in the past two years.

Excess conversion equity is putting a lid on return on equity while inflating book value - at a time when the stock market isn't tolerant of poor returns. And the usual gang of institutional investors has been scared off by fears of higher interest rates and a marked decline in post-offering price increases, or "pops."

The result: rock-bottom prices - as low as 60% of book value - that haven't been seen since late 1994.

There's no reason, either, for the prices to rise, said Gerard Cassidy, analyst at Hancock Institutional Equity Services in Portland, Maine. "On earnings, these stocks are very expensive," he said. "They're carrying too much capital."

In one way, the woes of the recently converted thrifts could prove a boon to mutuals considering the same step, according to a market observer.

The downside, of course, is that their stock won't fetch as high a price as it might have done a year ago. But with the market weaker and fewer investors interested in conversions, fewer shares would be sold in the offering. This means a lower final appraisal and less excess capital generated.

That could make now the "perfect time" to convert from the standpoint of the thrift executives who would have to deal with the excess capital, said Martin S. Friedman, vice president of Friedman, Billings, Ramsey & Co., Arlington, Va.

A group of 22 thrifts that converted from February through May is currently trading at an average of 74% of book value. Several others that have converted since May are trading even lower - as little as 61% of book value. Their average is about 76%.

By contrast, thrifts that converted in late 1994 and in 1995 have been trading at no worse than 85% of book value and in some cases well above book.

The difference largely reflects unsatisfactory returns on equity that the newer conversions have been reporting compared with projections, analysts said.

"We're dealing with a marketplace that does have some bearish tendencies," said Anthony Polini, an analyst at Advest Group in New York. "This has not been a great year for bank and thrift stocks, and the market has been unforgiving for earnings disappointments."

The prices have also stumbled because investors have been worried about recent volatility in the stock market and the possibility of an interest rate hike that could hurt rate-sensitive thrifts, Mr. Friedman said.

Mr. Friedman explained that professional depositors have been put off by the market uncertainty and a reduction in post-IPO price increases. Meanwhile, he said, institutional investors, recognizing what is happening, have held back from getting into the stocks because they know the prices will fall.

"People are walking away from the market in general, and because of that there's been less interest in some of these conversions today than there might have been six months ago," said James Moynihan, senior vice president of Advest Group in Boston.

In addition, Mr. Friedman said, the consolidation wave that swept the industry last year, particularly the upper echelons, has slowed down, and the market is already glutted with recent stock conversions. Twenty-two of the conversions since the beginning of February took place during six weeks beginning in late March.

The last time prices were this low was in late 1994, when rising interest rates had spooked the market. At the time, price-to-book ratios went as low as 60%. After a few months, however, prices began to rise, eventually hitting book value, Mr. Friedman said.

"These things have a bottom. This is the time to buy them," Mr. Friedman said. "It's hard to find these good franchises trading in the 60s for long."

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