Staging a dramatic comeback, the nation's 100 largest banking companies advanced 11.3% in market capitalization during the first quarter to a record level.

A quarterly American Banker survey shows the aggregate market value of the largest publicly traded banking companies at an all-time high of $291.4 billion on March 31, up from $261.8 billion at yearend.

The gains, which reflect renewed confidence in banks now that investors think the Federal Reserve is nearly finished in its credit tightening program, more than offset the precipitous 7.7% slide banks suffered last fall as investors reacted to the Fed's rate hikes.

"The market's feeling about rates could hardly have been more different in January and February than it was just a couple of months earlier," said analyst Frank J. Barkocy of Advest Inc.

BankAmerica Corp. once again overtook Citicorp as the industry leader in market capital with $17.9 billion on March 31.

BankAmerica and Citicorp have traded places at the top of the market capital rankings for the past five quarters. The San Francisco company's most recent stint in first place had occurred during the second quarter last year.

Citicorp's market value on March 31 was $16.8 billion. In third place was NationsBank Corp., Charlotte, N.C., at $14 billion.

Shawmut National Corp. scored the biggest percentage gain, rising 61.1% to $3.2 billion in market capital. The gain reflects a strong rise in share price for the Boston and Hartford, Conn.-based bank, which during the quarter announced plans to merge with Fleet Financial Group Inc.

Michigan National Corp., Farmington Hills, which also announced a sale - to National Australia Bank - was second with a gain of 38.8% to $1.4 billion. It was followed by the well-regarded Boatmen's Bancshares, St. Louis, up 36.4% to $3.9 billion, and Mellon Bank Corp., Pittsburgh, which picked up 33.1% to end the quarter with nearly $6 billion in market capital.

Banks with a turnaround story to tell also grew. Midlantic Corp., Edison, N.J. and Union Bank, San Francisco, ranked fifth and sixth in percentage gain during the quarter.

The primary reason for the growth in the market value of banks was investors' moods about interest rates. They shifted from pessimistic in the fourth quarter to more sunny recently, on the possibility that rates could be near their peak.

"A feeling set in that the inflation rate was not going to move up sharply, that the economy was slowing down and so the rate spiral was not going to go on much longer," Mr. Barkocy said.

"Things got put on hold a bit during March based on the weakness of the dollar, but now the bank group appears to be moving at a strong pace again," he added.

The overall capitalization of the industry's leaders is up by a striking 187% since bottoming out at $101.4 billion on Dec. 31, 1990, in the midst of the worst period for banks since the Great Depression.

J.P. Morgan & Co., New York, ranked fourth in total first-quarter capitalization at $11.5 billion. Banc One Corp., Columbus, Ohio, was fifth at $11.3 billion.

Cleveland-based Keycorp moved up a notch into the top 10 at $6.8 billion, trading places with New York's Chase Manhattan Corp., at $6.3 billion.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.