Consolidation in the e-commerce business is spurring talk that Marshall & Ilsley Corp. may spin off part of its technology operation.

The Milwaukee banking company is among several that are coming under pressure to spin off such nonbank businesses as the gap widens between low bank-stock valuations and the high prices the market awards to technology stocks.

Analysts reason that the banking companies' low stock prices will put their subsidiaries at a disadvantage in attracting talent and making acquisitions. A possible solution would be to spin off parts of their technology business to investors, or create tracking stocks that place a higher value on the businesses.

"Bear markets ultimately bring the good ones down with the bad," said Ben B. Crabtree, an analyst at George K. Baum in Milwaukee. The higher value that investors once awarded to banks with technology businesses "seems to have gone away. If the market continues to ignore these values," he said, banks "might have to do something."

The speculation last week focused on Marshall & Ilsley's data processing and Internet processing divisions.

M&I, a mid-capitalization bank with $24.3 billion of assets, has mulled the possibility of a spinoff for years, and recent events in the market make the case for doing so more compelling.

The announced merger of bill-payment providers CheckFree and Transpoint two weeks ago put pressure on other e-commerce competitors to bulk up. But M&I's current stock price constrains it from making deals.

Though its shares trade at a higher multiple than many bank stocks, at 13 times projected 2000 earnings, its share price is well below what analysts estimate it should be, given its e-commerce business.

"The subsidiary is clearly batting from a disadvantage in terms of its currency," said Rosalind Looby, an analyst at Donaldson, Lufkin & Jenrette in New York.

Ms. Looby calculated that M&I's processing, Internet technology, and banking divisions add up to an implied value of $63.52 for the stock, versus $46 at Friday's close.

M&I would not comment on the possibility of a spinoff.

Chase Manhattan Corp., U.S. Bancorp, and Zions Bancorp. also are high on analysts' lists of companies likely to consider spinoffs.

Chase, whose venture capital unit generated record profits in the fourth quarter, has hinted at making a move to capture more value from it. The bank met with Wall Street on Feb. 9 about the division. The price/earnings ratio of Chase stock is about 12.

Zions' DST Systems, a signature-capture product for the Internet, has failed to give much of a lift to the bank's price/earnings multiple, which is about 15, despite contributing $20.86 of projected revenues per share in 2000. And U.S. Bancorp, whose stock has a price/earnings ratio of less than 8, isn't reaping any reward from its lucrative processing business, which accounts for 17% of its revenues, Mr. Crabtree said.

The spinoff strategy has its pluses and minuses. A banking company whose own stock is depressed could use the separate Internet stock to make acquisitions and solidify its position in the sizzling dot.com market.

It would also help the units retain and lure talent by offering stock options in the Internet company.

But if ownership of a unit is diluted to less than 50%, the parent risks losing control of the venture. And the spinoffs subject shareholders to the whims of a market that could cool suddenly.

"One has to ask the question whether this could be a big win for shareholders," Ms. Looby said. E-commerce stocks are off their peak, she said. And banks still face challenges with rising interest rates and margins shrinking in the fourth quarter, shaving earnings.

Also, spinoffs are not guaranteed to get the valuations of their peers. For example, projected revenue per share for 2000 in processing at M&I is $3.47, according to Ms. Looby. That compares with much higher figures for its competitors. First Data Corp. is projected to produce $14.06 a share in revenue, Bysis $19.85, and State Street Corp. $20.71.

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