With share prices of large banks reaching dizzying heights, analysts are looking to smaller stocks for investment opportunities.

Bank analyst Joseph Roberto of Keefe, Bruyette & Woods Inc. Monday upgraded shares of five banks with $20 million to $25 million of market capitalization, saying their prices should move closer to the levels reached by their better known brethren.

Mr. Roberto joined a growing number of analysts who have turned their sights away from banks with household names and are now focusing on small and midsize companies.

They say the smaller stocks' trading multiples are unusually low relative to the larger banks, and are due to rise. And they argue that the smaller banks are more likely to generate investment windfalls by being acquired.

"The valuations for the small and big stocks have been turned upside down," said David Berry, director of research at Keefe. "Traditionally, the smaller stocks trade at higher price-to-earnings ratios than the big banks."

Mr. Roberto upgraded Transfinancial Inc., Bowling Green, Ky., to "buy" from "attractive" and assigned an "attractive" rating to four banks that had been rated "market perform": First Tennessee National Corp., Memphis; Old Kent Financial Corp., Grand Rapids, Mich.; Bancorp South, Tupelo, Miss.; and United BankShares Inc., Parkersburg, W.Va.

These stocks were mixed amid Monday's general downdraft in the market. Transfinancial gained 25 cents, to close at $21.375; Bancorp South lost 50 cents, to $26.25; and unchanged were First Tennessee, at $38.50; Old Kent, at $46.75; and United BankShares, at $31.75

But many analysts said such stocks are due for a comeback. They noted that buyback programs and the general market rally have driven money-center banks' price-to-earnings multiples past those of the small-cap banks for the first time since the 1980s.

"People are hunting around for value, and it is natural to look at smaller banks" that have lagged, said Dennis Shea of Morgan Stanley & Co., who lists First Virginia Banks Inc., Falls Church; First of America Bank Corp., Kalamazoo, Mich.; and Huntington Bancshares, Columbus, Ohio, among the stocks he favors.

Katrina Blecher of Gruntal & Co. also has recommended several small- caps, calling them "stellar performers" that enjoy high credit quality and strong profit margins.

Her list includes Independence Bancorp, Ramsay, N.J.; Hubco Inc., Mahwah, N.J.; and Greater New York Savings Bank.

John Moore, an analyst at Morgan Keegan Inc., Memphis, also noted the returns and earnings that small-caps reap. He recommends Union Planters Corp., Memphis, and First American Corp., Nashville.

Richard X. Bove, an analyst at Raymond James & Associates, Tampa, has shifted his focus to midsize banks, arguing that buyback programs have pushed up the stock prices of money-centers about as high as they can go.

"As their stock prices keep going higher, the return on investment is unattractive," he said, "and it makes less sense to keep buying back stock."

Mr. Bove added that the big banks are going to have to acquire smaller ones in order to stimulate earnings growth. Banks in Alabama and Louisiana are particularly attractive takeover targets because the larger southeastern banking companies lack a major presence in those states, he said.

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