Bank stocks outperformed a slumbering market Thursday as investors showed signs of renewing their enthusiasm for the sector.
Analysts and investors attributed the renewed strength of bank stocks to signs that Japan might be making progress in resolving its banking crisis, the Federal Reserve's decision to leave interest rates alone, and continued faith that bank earnings will outshine those of most other sectors.
The Standard & Poor's bank index rose 0.59%. The S&P 500 closed down 0.18%.
NationsBank Corp. was the week's strongest performer, closing up $2.3125 Thursday, at $82.25 a share. That was up 7.9% for the week.
Credit Suisse First Boston bank analyst Michael L. Mayo said the rise may be due to investors' concluding that the company's pending merger of equals with BankAmerica Corp. has the potential to make the most money of all the major mergers announced so far.
Though investors may be slow to appreciate mergers of equals, there's no doubt they love outright acquisitions that involve big premiums.
And Star Banc Corp.'s decision last week to pay a big 44% premium to buy Firstar Corp. helped allay investors' fears that banks would no longer ante up.
"There were some concerns about when we'd see a big-premium deal again," said James J. McDermott, chairman and chief executive at the investment bank Keefe, Bruyette & Woods Inc. "I guess the Star Banc deal took care of that."
The Star Banc-Firstar deal suggests that even though NationsBank or First Union Corp. may be swearing off the kinds of costly deals that helped build their companies, numerous bank chief executives remain willing to pay whatever it takes to make their companies bigger.
Indeed, on a day when most people on Wall Street were heading for their summer homes, some were burning the midnight oil in anticipation of a last- minute merger announcement before the long weekend-a particular specialty of NationsBank chief Hugh McColl.
"Based on past experience I'll be staying here until four o'clock today," Mr. Mayo said.
In Thursday trading, shares of Ambanc Holding Co., Amsterdam, N.Y., fell 18.75 cents, to $17.125, after the $519 million-asset company said fees paid to its board of directors would be frozen until the company shows improved operating results. In future, the company said, directors' pay will be 65% in Ambanc stock and 35% in cash. The company's 10 directors are each paid $13,800 per year; each also gets options to buy 18,056 shares.
Ambanc is under pressure from shareholder Seymour Holtzman, who owns a 4.1% stake, to improve earnings or sell.