Though investors warmed to bank and thrift stocks in 1996, the number of institutions going public fell off from previous years.
While the number of commercial-bank initial public offerings increased slightly last year, that figure has declined 23% since its peak in 1993, according to Securities Data Co.
In addition, the number of mutually owned savings institutions converting to stock ownership also fell off in 1996.
The drops are hardly mystifying to analysts, who say those banks that wish to sell stock are already in the market. The IPO boom of the mid-1990s has subsided as the supply of banks waiting on the sidelines has diminished.
"Though market conditions are ripe, there aren't a bunch of banks waiting in the wings," said Eric Miller, chief investment officer at Donaldson Lufkin and Jenrette.
"The number of commercial bank IPOs may hop around, but they will stay on the low side."
As for thrifts, changes in the regulatory environment helped put a damper on the impulse to go public.
The conversion of New York's GreenPoint Financial in January 1994 drew regulatory attention to "pops" - immediate surges on the first day of trading - which thrifts were having, and compelled the Office of Thrift Supervision to look at such deals closely.
Since then, the government relaxed repurchase restrictions, allowing some thrifts to innovatively deploy excess capital. This has made some thrifts wary of raising too much equity through a stock issue.
The boards of many mutual thrifts have shied away from going public because of their fear of turning their institutions over to public investors and creating the possibility of a hostile takeover.
"Even though a hostile takeover is a rare event, for institutions converting to stock companies there is a fear of losing control," said Mark B. Cohen, principal at Sandler O' Neill & Partners LP. "Every thrift has its own set of circumstances, varying with the kind of board, the age of the management."
Analyst Martin Friedman of Friedman, Billings, Ramsey & Co. agreed that "change in control," is the biggest impediment to thrift conversion.
While the pool of potential mutual thrifts has diminished, there are still about 950 mutuals still out there, according to Chris Smith, research editor of SNL Securities Corp.
Mr. Smith expects the thrifts to pick up the pace of converting to stock companies, and anticipates that most of the mutuals will convert eventually. "I can't see this decline continuing forever," he said.
John M. Kline of Ryan, Beck & Co. is also optimistic.
"Even though there is an increase in appraisals and valuations, we'll continue to see a long stream of conversions," he said. "The market is still receptive, the multiples are still expanding, and the revenue streams are reliable.
But others are not so sure.
Mr. Friedman believes that if we continue at this pace, "in the next five to seven years, the pool of mutuals will get smaller and smaller."
In the commercial banking arena, only seven banks went public this year, according to Securities Data Corp.
While that is up from three in 1995, the number of commercial bank IPOs has been falling steadily since it peaked at 17 in 1993.
Industry analysts attribute the decline to the fact that most banks who have wanted to go public already have by now.
What will those who did dare to go public find?
"It clearly depends on interest rates and the rest of the economy," Mr. Miller said. "For banks we expect another year of good earnings. The banks overall continue to strengthen, so there is less need to enlarge the capital base by issuing stock.
"There's still a strong demand for financial institutions in the market, even with the run we've had," added Mr. Kline.
"There's a steady stream of these deals coming, of banks capitalizing on market conditions. While we won't see the shellacking in earnings that we have in the past," the investment community understands that the banks "have reliable earnings streams."
