Leading financial services companies around the world enjoyed a surge in total market capitalization in the six months through March 31, an American Banker survey shows.

The increase reflected both a general rebound in stock markets and renewed confidence in the global financial system.

The aggregate market value of the world's top 100 financial companies- including banks, securities firms, and insurance companies-rose by more than $700 billion in that half year, to $3 trillion.

Most dramatic was a near doubling of the market capital of Japanese financial institutions, reflecting investor confidence that Japan is getting its banking crisis under control. The stronger yen was also a factor.

Three Japanese banking companies were among the top five gainers-Asahi Bank Ltd., 277%; Mitsubishi Trust and Banking Corp., 195%, and Fuji Bank Ltd., 194%.

Two U.S. companies took fourth and fifth place in terms of percentage gains: Charles Schwab & Co. at 144% and Morgan Stanley Dean Witter & Co., 132%.

German companies were at the other end of the spectrum. The three worst performers were: Bayerische Hypotheken-und Vereins Group, down 30%; Deutsche Bank, 18%; and Allianz AG Holding, 15%.

Deutsche Bank was hurt by investor perceptions that it was still heavily exposed to emerging markets in Russia and elsewhere, and investors reacted negatively to its $10 billion bid for Bankers Trust Corp. of New York. Bayerische Hypotheken-parent of what is known as Hypo Vereinsbank-is struggling with troubled real estate loans.

The fourth- and fifth-worst performers were KBC Bancassurance of Belgium, down 12%, and Allstate Corp. of the United States, 11%.

Most others showed sharp gains. Switzerland's top financial institutions gained 45%, Australia's 41%, Britain's 40%, and France's 38%.

The 42 U.S. financial institutions in the survey gained nearly 35%, bringing their valuation to more than $1.1 trillion.

Analysts attributed much of the global surge in market cap to a recovery from last summer's dramatic fall in financial company share prices. These companies fared worse than the 10% drop in the Dow Jones industrial average during the period.

Their drop was triggered by investor concerns about bank exposure to troubled emerging market countries, including Russia, Brazil, and Indonesia and to the near collapse of the hedge fund Long-Term Capital Management LP, which devastated investor confidence in financial institutions. The fund was bailed out by a consortium of financial services companies that was organized by the Federal Reserve.

"This data points up not so much that market cap has increased but how depressed it was six months ago," said Lawrence Cohn, a banking analyst at Ryan, Beck & Co.

The biggest gainers were those that had been hit the hardest. They generally were companies with substantial international exposure.

Market valuations for Citigroup Inc., Chase Manhattan Corp., and UBS Corp. of Switzerland rose by 60% to 80%. Increases at domestically oriented companies were less dramatic. Washington-based Fannie Mae climbed only 8%, Fleet Financial Group 2%, and Wells Fargo & Co. less than 1%.

Some banks that were badly hurt last year bounced back toward earlier levels. From April 1 to Sept. 30, 1998, Citigroup's market cap fell 34%, from $127 billion to $85 billion. It had rebounded 68% by this March 31, to $144 billion.

Bank of America Corp.'s market cap slumped 27%, from $127 billion to $93 billion, only to recover 32%, to $123 billion.

Similarly, the market cap of London-based Lloyd's Bank PLC fell from $84 billion to $61 billion, only to climb back up to $82 billion. Japanese banks had also suffered a steep fall, declining 40% in the middle six months of 1998 before bouncing back.

U.S. financial institutions continued to dominate the top rankings. American International Group Inc., Citigroup, Bank of America, Fannie Mae, Chase Manhattan Corp., and Bank One Corp. occupied six of the top 10 positions.

The surge in stock prices of large banks and financial companies "is an indication that the economy is doing well and that investors believe it will continue to do well" said Raphael Soifer, a bank analyst at Brown Brothers, Harriman & Co.

Their very size makes it far less likely they can be acquired and easier to acquire other institutions, he said, adding, "Deals that make strategic sense will be easier to do."

"But keep in mind, consolidation is primarily driven by strategic rather than purely financial considerations," Mr. Soifer said.

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