NationsBank Corp. seemed to herald a new era in banking when on March 31 it vaulted past Citicorp to become the top banking company in market capitalization, with a value of $76.3 billion.
NationsBank's dominance lasted precisely one week.
On April 6, Citicorp's market value soared to $81.9 billion after the company announced it would merge with Travelers Group.
The cumulative value of Citi's shares has since retreated to $74.4 billion. But assuming regulators approve the merger and Citicorp and Travelers are recast as Citigroup, recent share prices would give the combined company a $150 billion market capitalization-which should dominate banking.
At least for a while.
Still, the arrival of NationsBank to a battle traditionally fought between Citicorp and BankAmerica Corp. "speaks to the realignment of the industry," said James J. McDermott Jr., chairman and chief executive of Keefe, Bruyette & Woods Inc., the New York firm specializing in bank securities.
Reflecting another remarkable bull run for their stocks, the aggregate market capitalization of the nation's top 100 banking companies advanced 10% during the first quarter, to $940.2 billion.
Though influenced by overall stock market trends, shifts in the industry's market capitalization telegraph how investors feel about banks' business strategies and management, as well as the economic conditions under which they are operating.
In general, analysts said, the first quarter gain was nourished by absence of any interest rate increase by the Federal Reserve and by diminished concerns about repercussions from the Asian financial crisis, continued good earnings, and ongoing takeover speculation.
Indeed, since snapping back from a traumatic credit crises at the beginning of the decade, banks have ranked among the favorite choices of investors.
"It hasn't been just acquisitions," said Anthony R. Davis, banking analyst at SBC Warburg Dillon Read & Co. "There has been an unparalleled improvement in fundamentals.
"Ninteeen ninety-eight will be the seventh consecutive year of record earnings for the U.S. banking industry," he said. "Since 1992 the industry has earned $275 billion, which is more than it earned during the three decades between 1960 and 1990."
In line with that performance, the top 100 banks have added market value for 12 straight quarters and in seven of the last eight years. The only exception was 1994, when the Fed was steadily tightening credit to thwart a return of inflation.
Assuming current trends continue, the 100 industry leaders could top $1 trillion in market value by June 30.
That would be a remarkable feat, considering that the top 100-a group that itself often changes-had overall capitalization of only $101.4 billion at yearend 1990, in the midst of the industry's worst period since the Great Depression.
In the fourth quarter of that year only a few banks in the top 25 were selling for more than $20 per share. NationsBank stock could be had for $17.125.
"I knew during the fall of 1990 that it was either the bottom or the end," recalled Mr. McDermott. "Then the industry started to crawl back, and the rest has been an amazing story."
The huge increase in market value, he said, "has enabled the banks to start acquiring not only each other but some important pieces of the financial sector-such as asset managers, brokerages, and consumer finance firms-to effectively buy back the customers they had lost."
That is especially true of the largest banks in market value. BankAmerica ranked third on March 31, at $57.7 billion; Chase Manhattan Corp. fourth, at $56.6 billion; and Banc One Corp. fifth, at $37 billion.
The emergence of NationsBank as the largest-capitalization bank stock is due to a combination of factors.
NationsBank was boosted 16.6% during the quarter by its acquisition of Barnett Banks Inc., Florida's largest independent banking company. Citicorp gained 11%, but investors were concerns about its large presence in Asia.
The only bank in the top 25 to lose market value in the first quarter was Wells Fargo & Co., still hurt by lingering effects from its acquisition of First Interstate Bancorp. Wells fell to eighth place from seventh as its market value slipped to $30.3 billion from $31 billion.
Mr. Davis noted speculation that Wells may be acquired in the next 18 months by either NationsBank or U.S. Bancorp. Minneapolis-based U.S. Bancorp. is nearly Wells' size in stock market terms, ranking ninth, with value of $29.9 billion.
