Mergers pushed banks up in the rankings of domestic initial public offering managers last year.

Including the No. 4 underwriter, Salomon Smith Barney-which was a unit of Travelers Corp. when Travelers merged with Citicorp in October to form Citigroup - the share represented by U.S. banks jumped to 16.8%.

Without Salomon, U.S. banks would have seen their market share shrink to 10.1% from 12.9% a year earlier, according to Securities Data Co.

J.P. Morgan & Co., which alone among U.S. banks has built an equity shop rather than buying a securities firm, was No. 2 among the banks last year. It ranked No. 6 overall and managed 4.2% of domestic IPOs, down from No. 5 and a 5.4% share in 1997.

The number of domestic initial public offerings slumped in 1998 to the lowest point since 1991, and proceeds of offerings dipped for the second year in a row. But seven deals were among the 25 largest IPOs of all time.

"Activity in the initial public offering market had a decidedly split personality," said Richard Peterson of Securities Data.

The IPO market, which like the broader equity markets had a dismal third quarter, bounced back at yearend. But many observers say they think it has not yet made a full recovery, saying a few large deals in the fourth quarter carried the day.

The market became highly concentrated in 1998, with the top three firms- Morgan Stanley Dean Witter & Co., Merrill Lynch & Co., and Goldman, Sachs & Co.-taking a 50% share. That was up from 39% a year earlier.

Some observers say consolidation was a symptom of the choppy year in the equities market, prompting issuers to seek larger players. Others point to a few giant deals on Wall Street that they say skewed the averages.

"I would argue that we have a much better handle on the typical IPO than a large Wall Street firm," said Chip Vetter, managing director and head of corporate finance at BancBoston Robertson Stephens.

Robertson Stephens, the San Francisco-based firm that BankBoston Corp. bought from the old BankAmerica Corp. in September, ranked No. 14 overall. But Robertson, a well-known technology boutique, ranked No. 6 in offerings in that sector, according to Securities Data.

"I would take 10 hot little technology companies over the typical giant IPO," Mr. Vetter said.

The aftermarket performance of technology issues, particularly of Internet companies, far outpaced that of any other sector last year.

Mr. Vetter said that trend was largely driven by retail investors. "Our job with institutional investors was keeping them from selling" once new Internet issues reached high levels, he said.

"It is tough to find the evaluation metric that makes any sense at these valuations. But for the winners, the valuations will be more than justified," Mr. Vetter said, pointing to the performance of successful technology stocks like Microsoft Corp. and Netscape Corp.

Frank Comas, a principal in global equity capital markets at BT Alex. Brown, said he expects Internet stocks to remain the strongest new issues for some time.

"But you could classify these stocks as being particularly vulnerable to any kind of bad news," Mr. Comas said.

Though smaller stocks far underperformed large stocks in 1998, Mr. Comas said small stocks' recovery since October is a good sign for IPOs in the first half of 1999.

BT Alex. Brown is the securities subsidiary of Bankers Trust Corp. The Baltimore firm completed its first full calendar year since being acquired by the banking company. It ranked No. 11 last year, with 2.5% of the market, up from No. 12 in 1997.

"My hunch is that the IPO market will be broader in 1999," said Dick Smith, managing director and head of equity capital markets at NationsBanc Montgomery Securities Inc., the securities subsidiary of BankAmerica Corp.

Mr. Smith predicted Internet offerings would continue to be popular in 1999, but he said he thought other sectors would improve over their performance in 1998, particularly media, telecommunications, and health care.

The San Francisco firm, which was purchased by NationsBank Corp. in 1997, became part of the new BankAmerica Corp. when those two banking companies merged in October. It ranked No. 13 in domestic IPOs last year, down from No. 10 a year earlier.

Among the giant deals last year, oil and gas company Conoco Inc.'s $4 billion IPO in October, managed by Morgan Stanley, shattered the record for a domestic IPO by more than $1 billion.

Other hefty deals in 1998 included two by Merrill Lynch, including Infinity Broadcasting Corp.'s $2.43 billion offering and Fox Entertainment Group Inc.'s $2.38 billion stock sale, the fourth and fifth largest IPOs of all time, respectively.

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