As Wall Street lessens its earnings expectations for financial companies, a few of the stronger performers have broken away from the pack.

The combination of investors' rotation out of the sector and their flight to names perceived as having relative earnings quality has helped widen the gap between the industry's elite and the also-rans.

Stock of American Express Co., which again met analysts' expectations by reporting 14% fourth-quarter earnings growth (see story on page 18), has a price-to-earnings multiple of 25.4, based on year 2000 estimates. Fifth Third Bancorp trades at 20 times earnings and Citigroup Inc. at 17. All have remained able to attract loyal followings of investors, helping their price-to-earnings multiples far outdistance those of most other financial companies.

"There has been a flight to quality," said Katrina Blecher, an analyst at Brown Brothers Harriman & Co. in New York. "Those companies with the least risk are commanding the highest multiples."

Since last May a series of events has led investors to flee from most financial stocks, driving down their prices. Fears of higher interest rates, merger integration problems, tighter interest rate margins, and deteriorating credit quality all have contributed to the trend.

"Given the number of disappointments that came out of the recent round of consolidation and the earnings pressures by rising interest rates, the focus has intensified on the part of investors," said Henry C. Dickson, an analyst at Salomon Smith Barney, a Citigroup unit.

That has led investors to rely on names they perceive as having reliable earnings streams, and this has kept these companies' price-earnings multiples well above the rest of sector.

"At this point, the banks in the middle group probably represent the best value," Ms. Blecher said. Some have "been over-penalized in the marketplace." She said SunTrust Banks Inc., trading at 12.7-times its estimated 2000 earnings, and Wells Fargo & Co., at 14 times earnings, look attractive.

Nevertheless, "in the near term, as long as this high level of uncertainty and choppiness remains, this divergence could continue," said William B. Rubin, a principal at Keefe Managers Inc. in New York.

A series of earnings disappointments last year gave investors numerous reasons to jettison stocks. First Union Corp. had integration problems with its CoreStates Financial Corp. purchase; its multiple is now around 9. Stock of Bank One Corp., after the company's troubles with its First USA credit card unit, has a 10.4 multiple.

Meanwhile, U.S. Bancorp and National City Corp. were among a small number of banking companies that felt a squeeze from sluggish deposit growth, which has put pressure on interest rate margins. U.S. Bancorp's multiple is 9, National City's 8.5.

"The persistent liquidation of the sector is really driving a lot of this," said David Ellison, a portfolio manager at FBR Fund Advisors, a Boston mutual fund company that invests in financial companies.

The investors who have stayed with financial stocks have looked for names that weathered well the last economic downturn, Mr. Ellison said. These investors tend to be conservative and are nervous about the recent run-up of the stock market.

"There is a huge core of people out there not selling those names," he said. But "they are concerned about the economy, the valuation of the market, and the euphoria of technology."

Though the gap in valuations is wide, Mr. Rubin predicted a narrowing. For example, American Express, was expected to generate 14% to 15% earnings growth. But Chase Manhattan Corp. has an 11.9 price-to-earnings multiple despite earnings projections in the same ballpark. Though Chase has business lines in capital markets that are perceived as more risky than what American Express does, it does not justify the gap between the two companies, some analysts said.

"In the long term the divergence has to close," he said. "Does Amex deserve have a P/E multiple 2.5 times that of Chase even though it has the same earnings growth prospects?"

In late-day trading Monday, the American Banker index of 225 banks had lost 2.9%, the Dow Jones industrials 2.2%, and the Nasdaq composite 3.3%.

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