Hong Kong's Bank of East Asia Ltd. and Portugal's Espirito Santo Financial Holding SA recently issued American depositary receipts, highlighting the increasing popularity of these programs.

They joined Argentina's Banco de Galicia y Buenos Aires, Bank Austria, France's Societe Generale, Switzerland's CS Holding, and Greece's Credit Bank A.E., which set up ADR programs earlier this year.

Espirito Santo raised $76.9 million in equity by issuing 2.65 million in registered receipts.

East Asia did not raise new capital. Instead, the bank issued ADRS that can be bought and sold in lieu of existing shares.

A third bank, Hong Kong's Wing Hang Bank Ltd., of which Bank of New York Co. owns 51%, is planning to issue ADRs.

"It's only a matter of time before other banks issue ADRs," kenneth A. Lopian, vice president for ADR programs at Bank of New York, said. Swiss. German, and French banks are likely to be next, followed by Mexican banks, he added.

Showing the Flag

ADRs help foreign banks raise their profiles in this country and make their shares accessible to American buyers.

For investors, ADRs represents an easy way to diversify into foreign securities.

"The availability of shares in the U.S. is an important part of the bank's strategy to broaden its shareholder base in international markets," said Gerhard Randa, Bank Austria's deputy chairman.

"Investors, view them as safer and easier to buy than shares on the home market," added Elisabeth Morrissey, a, managing partner with Washington-based Kleiman International Consultants Inc. "Banks hope ADRs will increase international interest in their stock and help widen their shareholder base." ADRs - negotiable certificates that represent ownership of shares in it foreign company - are bought and sold in dollars.

Different Varieties

They come in, all shapes and sizes, but in their simplest form they are receipts provided by a broker who buys shares for a customer directly on the bank's home market.

The other kind are "sponsored" ADRs, for which a U.S. bank or brokerage firm handles dividend payouts, notifications, and processing. They frequently serve as custodians as well.

There are three types of sponsored programs:

* Unlisted, unregistered ADRS sold over the counter.

* Registered and listed ADRs issued against existing shares and sold without raising equity;

* Listed, registered ADRs that are isseud to raise equity.

Only a few foreign banks have opted for full registration and a full-fledged New York Stock Exchange listing.

These include Japan's Mitsubishi Bank; three of Spain's biggest banks, Banco Bilbao Vizcaya, Banco Central Hispano, and Banco Santander; and Portugal's Banco Commercial Portugues SA.

Only Banco de Galicia and Espirito Santo have raised common equity by issuing ADRs.

Most foreign banks prefer issuing unregistered, unlisted ADRs that trade over the counter because they are the simplest and fastest means to access the U.S. market.

Volume Surging

Fifty-four foreign banks now trade in ADR form in the United States.

Trading volume is picking up sharply. In the first half, for example, trading volume in Banco Bilbao Vizcaya shares reached $118.8 million, up from $36.8 million for all of 1992.

Volume in Allied Irish Banks PLC rose to $4.7 million, from a $1.15 total last year. Trading in Dresdner Bank AG reached $70 million, compared with $80.6 million for all of 1992.

"We'll see a significant increase in ADR trading." Mr. Lopian predicted. "U.S. investment in non-U.S. securities has grown exponentially, and all the leading investment banks are investing heavily in research, sales, and trading."

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