Despite a good run this year, financial stocks trade at a considerable discount to the market as a whole.

But Sun Won Sohn, the chief economist of Wells Fargo & Co., told American Banker in an interview last week that the difference in multiples between financials and the Standard & Poor's 500 index will narrow next year.

According to data from Thomson Financial, the average multiple of financial stocks is 16.3 times 2001 earnings, while the S&P 500 trades at 23.9. Mr. Sohn would not go so far as to say that the difference in multiples between financials and the S&P 500 would disappear, but he predicted the price/earnings ratios of financial stocks and the overall market will shrink noticeably in 2002.

"Early next year we should be out of the woods, and analysts will have the scorecard" that will give the sector a push, he said. He also said he expects the wider market to remain sluggish, and that should give the financial services category an advantage.

Andrew Collins, an analyst at U.S. Bancorp Piper Jaffray, agreed. He said that multiples could well rise from about 60% of the overall ratios within the S&P 500 now to about 80% in the next 12 to 18 months.

Mr. Collins has long argued that stocks such as Citigroup Inc., which trades at an 18.8 multiple, deserve to trade at a ratio similar to General Electric Co. shares, at more than 30 times earnings.

Catherine Murray, an analyst with J.P. Morgan Securities Inc., disagreed with those who say bank stocks are about to close the gap. She said she expects that financial services companies' shares will not exceed multiples of 62% of the S&P and that they will underperform the S&P to some extent in the near term.

"Disintermediation will hold down bank stocks" as companies leave the banking sector to seek funding from capital markets, she said. That would benefit some banking companies but not necessarily the entire category, Ms. Murray said.

Other observers agree the traditional discount of financial multiples to the S&P 500 is here to stay. Adam J. Lewis, a listed stock trader at Keefe, Bruyette & Woods Inc., said that financials lack the high profit-growth rates of the S&P.

The American Banker index of 225 banks rose 0.75% Friday; the S&P 500 rose 0.57%.

The dog days of summer usually depress stock market volumes, but shares of U.S. Bancorp have been lively in the past couple of weeks.Volume has been heavy enough to generate rumors on the Internet that a deal may be in the works.

What's probably happening is that the company is busily repurchasing stock now that its board has approved a plan to buy back 56.4 million shares to replace those issued with the acquisition of NOVA Corp. Within days, block trades - often exceeding a million shares each - were appearing with regularity. They totaled more than 14 million shares at Thursday's close.

Company officials declined to comment Friday about the repurchase program.

When the merger last year of U.S. Bancorp and Firstar was still being worked out, both companies rescinded their repurchase programs.

Nancy Bush, an analyst with Prudential Securities, said that is not unusual. "After a deal, everybody starts buying back stock." U. S. Bancorp, Ms. Bush said, "is not on the block."

U.S. Bancorp's stock fell 0.04% Friday.

Patrick Reilly contributed to this article.

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