Conventional wisdom says that the decline of deal activity in the banking sector stems solely from declining stock prices, but one analyst argues that it would be sluggish even if stock prices were still at their peaks.

In a report, Marni Pont O'Doherty of Keefe, Bruyette & Woods Inc. contends that mergers and acquisitions are on the downswing because targets in many of the attractive markets have already been gobbled up.

So far this year, deal activity for the banking sector totals $12.4 billion, against $46.2 billion in the same period last year, according to Securities Data/Thomson Financial.

Some of the best markets are in the Southeast and Southwest, and "in many of these places, it's game over," Ms. Pont O'Doherty said in an interview. "The bulk of consolidation has been done in the must-have markets. There is no other Barnett out there."

Barnett Banks Inc., which had considerable market share in Florida and other attractive areas in the Southeast, was purchased by NationsBank Corp. in January 1998. NationsBank merged with Bank of America Corp. last year and took its name.

Only a handful of banking companies dominate in each of the 40 fastest-growing metropolitan statistical areas, or population centers in the United States, according to Ms. Pont O'Doherty's research.

Market leaders in many of these attractive areas tend to be the same bank. Bank of America is the market leader in 12 of the 40 most attractive growth markets; Wells Fargo & Co. is the market leader in nine areas; and Bank One Corp. is market leader in three attractive areas. Chase Manhattan Corp., U.S. Bancorp, and Amsouth each are market leaders in two of the 40 most attractive growth areas.

On average, the five largest players hold 73.2% market share in the 40 attractive growth markets. In 13 of the areas, deposit market share held by the top five is 80% or more, according to the study.

The fastest-growing metropolitan statistical area is Las Vegas, where the population grew 60% during the 1990s. Las Vegas was followed by McAllen-Edinberg-Misson in Texas, which grew by 39%; Boise City, Idaho, 37%; Austin-San Marcos, Tex., 34%; and Phoenix-Mesa, Ariz., also 34% larger.

The U.S. population overall grew 8.7% in the last decade.

The state with the largest number of fast-growing metropolitan statistical areas is Texas, followed by Florida, California, Arizona, Colorado, Utah, and Washington, according to the report.

"While the decline in bank prices is likely having some depressing effect on merger and acquisition activity, we think there is also a case to be made that the bulk of consolidation in some of the choicest markets has already occurred," Ms. Pont O'Doherty concluded.

Ms. Pont O'Doherty said CVB Financial Corp., a $2 billion-asset banking company in Ontario, Calif., and $2.85 billion-asset Southwest Bancorp in Houston, could become targets, because they are in attractive markets.

Possible suitors for CVB could be City National Corp., Wells Fargo, and U.S, Bancorp, said David Winton, an analyst who covers the company for Keefe, Bruyette.

Potential buyers of Southwest include Wells Fargo, SouthTrust, and Compass Bancshares, Ms. Pont O'Doherty said.

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