Even though the nation's top banks showed healthy returns at the end of the second quarter, Wall Street isn't responding with much confidence, according to an American Banker survey of the nation's leading banks done in conjunction with SNL Securities.

Although banks cleaned up their balance sheets, improved efficiency, and started to make loans again, ratios of market value to book value declined dramatically over the last year, including a 13% drop for the nine largest banks.

The ratio of market to book value for the nine top institutions dropped from 152% in last year's second quarter to 131.7% for the corresponding period this year.

Regional banks with $20 billion to $70 billion of assets saw a smaller, but still significant, decline. The ratio of market to book value for this group dropped from 170.3% to 160%.

Banks with between $10 billion and $20 billion of assets saw an average ratio of market to book value of 166.2% in last year's second quarter, while in the corresponding period this year that ratio dropped to 163.2%. "A lot of investors are saying, I had my ride, I'm going to get off now," said Scott Winslow, an analyst at SNL Securities.

Despite the market's negative reaction, analysts continue to praise banks for dumping problem assets. The nation's nine largest banks had an average nonperforming-assets ratio of 2.49% in last year's second quarter. In this year's period, those banks saw their nonperforming assets as a percentage of total assets sink to 1.26%.

Regional banks dropped a significant amount of nonperformers as well. Banks "attacked the credit problems and got them off the books relatively quickly. We haven't been through a cycle with banks putting new loans on the nonperforming books for a while," said Dennis Shea, an analyst at Morgan Stanley & Co.

Edison, N.J.-based Midlantic Bank Corp., known in the industry for its dramatic turnaround, depleted its nonperformers dramatically since the second quarter of last year. The nonperforming assets ratio was 7.35% in the second quarter of last year. Today it is at 3.32%

Another sign of collective health in the industry is the significant improvement in return on average assets over last year's second quarter. Regionals with between $20 billion and $70 billion of assets posted an average ROA of 1.21%. this quarter, up from 1.17% in the same period last year. Banks with between $10 billion and $20 billion of assets posted an average ROA of 1.18% this quarter, up from 1.16% last year.

The nine largest banks as a group bucked the trend with declines in ROA as heavy trading losses dragged down results. J.P. Morgan's trading revenues dropped from $346 million in the second quarter last year to $200 million, according to Mr. Winslow.

But the drops in ROA for some money-centers was not a sign that they are sinking. They are merely "treading water," he said.

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