Revenue growth has become banking's Holy Grail, more sought after than even some of the most tried and true measures of corporate success.

"Earnings per share is important, but it has to be driven by revenue growth," says David Moffett, vice chairman and chief financial officer of Milwaukee-based Firstar Corp.

Wall Street certainly seems to agree. With the banking industry regularly reporting historically high earnings, investors and analysts are turning their attention from slash-and-burn cost cutting to focus on prospects for growth. And to an increasing degree, "growth" means growth in revenues.

A study prepared by Salomon Smith Barney, a Citigroup unit, shows banking companies that racked up the highest annual rates of per-share revenue growth between 1990 and 1998 are trading at the highest price/earnings ratios in the industry.

"Investors have awarded the highest valuations to companies with the most consistent records of generating strong revenue growth," according to the report by analyst Henry C. Dickson. "The reason is simple: It is easier to grow EPS with strong revenue growth."

Analysts caution that it is difficult to attribute high p/e ratios solely to revenue growth. But according to Salomon's survey, through good times and bad, stocks such as Fifth Third Bancorp., Synovus Financial Corp., Firstar Corp., and First Tennessee National Corp. have outpaced those of other big banks.

And except for First Tennessee, their price/earnings ratios are well above 20, compared with p/e ratios ranging from 9.5 to the mid-teens for most other banks in the study. First Tennessee's ratio was not bad either, at 17.3. (All p/e ratios are based on stock prices as of April 5, the day used in the survey.)

These top-valued companies boosted revenues quarter after quarter, helping to generate better earnings per share, Salomon says. That, in turn, helped boost credibility with investors.

Cincinnati's Fifth Third, which enjoys a p/e ratio of 23.7, ranked second in annualized revenue growth, and lagged only Synovus Financial Corp. Fifth Third produced a 14.5% rate of revenue growth over the nine- year period.

"Looking at revenue has become more important because it's an indication that commercial banking has found niches that have growth potential for the future," said Samuel Hayes, professor emeritus of finance at Harvard Business School. The ability of banks to deliver new revenue streams belies "the notion that commercial banking is an endangered species."

On the other hand, banks with lower p/e ratios also have lower revenue- growth-per-share rates. Bank of America Corp.'s p/e was 12.8, with revenue growth of 6%. First Union Corp., with 7% growth, had a p/e of 12. (The Salomon report did not include Citigroup, its owner.) Chase Manhattan Bank, with 3% revenue growth over the nine-year period, sported a p/e of 13.5, based on 2000 earnings.

John Meyers, a spokesman for Chase, said using revenue data over a nine- year period tends to overweight the past at the expense of more recent events, such as Chemical Bank's purchase of Chase in 1996.

"The revenue growth figures for the past couple of years underscores all the more the new institution we have become," Mr. Meyers said.

While Mr. Hayes says EPS growth is the ultimate litmus test for any stock, he argues that the market's growing emphasis on revenue growth is warranted.

"The market is still viewing bank stocks with a wary eye," Mr. Hayes said. "It is an industry selling at a very large discount to the market. That is why there is this preoccupation with this growth in revenues. And I think it makes sense."

Thomas Finucane, an industry analyst for John Hancock Advisors in Boston, says the key to a bank's future earnings is whether it can "keep business in the door and keep it sticking to the books in a profitable way." He added that "anybody can cut costs. But the art is in sustaining revenue growth."

"At the end of the day it comes down to management," said Michael Granger, an analyst at Fox-Pitt, Kelton in New York. "They have a very strong goals-oriented management that has a culture that infiltrates the entire organization."

"While operating focus isn't very sexy, it's what delivers the higher- above-normal results," said Neal E. Arnold, executive vice president and chief financial officer of Fifth Third. "High on the list is a conservative philosophy which holds us in good stead in difficult times."

"You have to sit in your office and figure out how to run branches," Mr. Ryan said. "It's a lot less fun than playing golf with potential merger partners."

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