Bank stocks are not likely to make compelling gains in the coming year, because of the popularity of technology and Internet stocks, at least one analyst contends.

"Until we get a crash in tech stocks, bank stocks are not going to make strong gains," said Charles Cranmer, a senior analyst at Keefe Managers Inc. "Bank stocks may have a small bounce at the beginning of the year" but could languish later on.

Mr. Cranmer acknowledged that a leveling-off of interest rates and the pickup in bank consolidation could boost the stocks of banks that are sold. However, he is quick to point out that even merger activity is not a surefire catalyst, because investors have been "punishing" the shares of big-bank mergers.

One of the biggest problems facing bank stocks is a general shift in investment strategy, Mr. Cranmer said.

"Investors do not buy low and sell high," he said. "They do momentum investing, where they buy a stock simply because it is performing well."

During their heyday, bank stocks were returning as much as 30% a year, Mr. Cranmer said. Now, "an investor can get that return and more with some of these technology stocks."

Since the beginning of the year, the American Banker index of the 50 largest banks has fallen 22.82% and its index of 225 banks has fallen 46.83%. The Standard & Poor's technology index, however, has gained 59%.

Other bank analysts agree that the popularity of technology stocks is increasingly hurting the banking sector because new cash is consistently moving toward the dot-com companies.

Last week, shares of Microsoft challenger VA Linux Systems, Sunnyvale, Calif., surged 698% the day it went public.

Investors flocking to dot-com companies do not bother to analyze them, said Andy Collins, an analyst with ING Barings.

"Investors have gone from buying stocks based on price-to-book ratios, to price-to-earnings ratios, to revenue growth," Mr. Collins said. "Now they are buying on ideas. That's what many of these Internet companies are - just ideas."

Mark Cavallone, a technology analyst with the equity group at Standard & Poor's, said he "can understand why some investors might turn away from banks and put their money in technology companies."

Many technology companies - excluding the newer dot-com companies - are expected to have earnings growth of more than 20% in 2000, he said. That rate will be 12% to 15% for banks, according to most bank analysts.

Mr. Cavallone pointed out that none of the technology companies he covered has issued lower-than-expected earnings. However, he was well aware of First Union Corp.'s and Bank One's shortfalls.

Lawrence Cohn, an analyst with Ryan Beck & Co., does not agree that the popularity of technology stocks is the sole reason bank stocks are languishing.

"To believe that bank stocks are not going to make money until Internet investors get their comeuppance is wishful thinking," he said. "The reason why bank stocks are down is because there is no compelling reason for people to invest in them, and people are going where the action is."

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