Two or three years ago banks were considered good investments, because compared with other companies they were undervalued and had good earnings prospects.

These days, however, with bank stock prices at record highs and solid earnings reports routine, investing in banks has become more a game of guessing which will be the next to sell.

And this year many regional banks are feeling the wrath of investors impatient with the reluctance of management to sell.

Late last year, after Barnett Banks Inc. and CoreStates Financial Corp. sold for huge premiums, investors furiously bid up the shares of several regional banking companies in the belief that these companies would follow suit. Among the benefactors of this speculative frenzy were such companies as Firstar Corp., SouthTrust Corp., First American Corp., Mercantile Bancorp., and Summit Bancorp.

But as of Friday afternoon, all these companies remain independent. And investors have expressed their disappointment by selling off the stocks. Despite a continued bull market for banks-the Standard & Poor's bank index has risen 8.2% since Jan. 1-share prices at some regionals have fallen nearly 20% this year.

"It almost seems like market sentiment in the regionals oscillates between apathy or frenzy," said Sean J. Ryan, a bank analyst at Bear, Stearns & Co.

More than ever, analysts and traders say, movements in bank stock prices reflect merger sentiment. With few earnings surprises, bank stock performance these days is largely dictated by how likely investors think it is that a company will sell.

For example, Firstar of Milwaukee, long thought likely to sell to First Chicago NBD Corp. or Banc One Corp., has fallen 17.2% since the start of the year. A deal involving that bank is considered less imminent now that First Chicago NBD and Banc One have agreed to their own merger.

Huntington Bancshares has fallen 10.5% for similar reasons. Summit of Princeton, N.J., and First Tennessee National Corp. have also been punished for their continued independence.

Investors have especially pounded companies that have announced their own acquisitions rather than sell.

Shares of Mercantile Bancorp. of St. Louis and Union Planters Corp. of Memphis, both of which announced big acquisitions in the first quarter, have given up 19.6% and 18%, respectively, since Jan. 1.

Also hurting these bank stocks is the fact that, notwithstanding several high-profile megamergers of equals announced in April, the pace of bank consolidation has slowed since February.

James J. McDermott Jr., chairman and chief executive of Keefe, Bruyette & Woods Inc., attributes the pause to bank chief executives either trying to absorb their recent acquisitions or figuring out what such huge deals as BankAmerica Corp.-NationsBank Corp. mean to them. "People are digesting now," Mr. McDermott said.

Most investment bankers, analysts, and traders expect the consolidation wave will regain its force this summer.

Some expect pressure from year-2000 computer problems will force regional banks to sell soon, while others think executives at the biggest banks, many of whom lately have been focusing on merging with other huge banks, will get interested in the regionals again.

Furthermore, adds Bear Stearns' Mr. Ryan, the dip in their stock prices means price tags for regionals could become attractive again.

Whenever consolidation resumes, traders say the hits regional banks have taken this year show how investor expectations for these companies have changed fundamentally.

"It used to be that value investors bought banks for the long haul because they thought the sector was undervalued," a trader said. "But no one thinks the sector is undervalued anymore, and people who are getting in now are hunting for the next takeover.

"It's very short-term thinking, but it's a sign of the times," he said. "Really, the main concern now is not getting stuck with an overvalued company that pays too much for an acquisition."

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