Some of the biggest institutional holders of bank stocks were dumping shares in the months before the market downturn.

In the second quarter, as turmoil in Asia deepened and the rate environment worsened, NationsBank Corp. cut bank stock holdings 5.7%, to $5.8 billion; Travelers Group Inc. 4.8%, to $6.5 billion; and American Express 3.1%, to $4.0 billion, a quarterly American Banker survey shows.

As a group the top 25 institutional investors added only $2.4 billion, or 1.09%, to their holdings of the top 50 banks, according to statistics compiled by CDA/Spectrum Research Services, Rockville, Md. That is less than half the $5.4 billion, or 2.64%, added in the first quarter. (Complete tables begin on page 28.)

Troubles with Asia's banking system and economy started making investors jittery during the first quarter, said Peter Kovalski, bank equity analyst with Evergreen Asset Management, a subsidiary of First Union Corp. But those concerns became more pronounced when "the problems in Asia started becoming front page" news.

During the second quarter most banks actually made or exceeded their earnings expectations, Mr. Kovalski said. "But it was getting increasingly difficult to recommend bank stocks at the levels that they were trading at."

Market experts said another factor was the flattening yield curve-in which short- and long-term yields converge, making it difficult for lenders to make money.

Selling by the top institutional investors in bank stocks has been on the rise since the fourth quarter, when the first rumblings in Asia's financial system shook the U.S. market. However, high-priced mergers and a more stable interest rate environment prompted investors to take both bank and thrift stocks to dizzying highs.

Some of the biggest sellers of bank stocks in the second quarter were sellers in the first. Travelers reduced its bank portfolio 2.8% in the first quarter, to $6.6 billion, and American Express sold 2.7% of its portfolio, reducing it to $4.2 billion.

Bank of Tokyo Ltd. sold 0.01% of its $4.3 billion in the second quarter, and the same percentage out of $4.4 billion in bank stock holdings in the first quarter.

Institutional investors also backed away from thrift stocks in the second quarter. The top 15 institutional investors added $435 million, or 2.06%, to their holdings in the top 25 thrifts from April to June, compared with $518 million, or 3.01%, from January to March, according to CDA/Spectrum. The research concern is a unit of Thomson Financial Services, which is also the parent of American Banker.

Sellers of thrift stocks in the second quarter that also sold in the first include Putnam Investment Management, which sold 19.96%, reducing its portfolio to $875 million holdings in thrift stocks. That followed a 36.3% reduction in Putnam's thrift holdings in the first quarter.

Wellington Management Co. reduced its thrift portfolio 5.76%, to $1.1 billion, in the second quarter, after a 20.16% reduction in the first.

Barclays Bank PLC sold off 3.98% percent of its thrift shares, reducing its thrift portfolio to $1.4 billion in the second quarter, after reducing it 1.64% during the first.

Undaunted by the trouble brewing overseas, several institutional investors actually bought bank and thrift stocks during the second quarter, attracted by their relative cheap prices.

"The banks were a safe haven" during the second quarter, Mr. Kovalski said. "Other industries were reporting negative surprises but the bank stocks overall were meeting them. So as a defensive measure, investing in bank stocks was a good place to put cash."

Institutional buyers of bank stocks in the second quarter included Equitable Cos., which added 25.41% to its bank holdings, building them to $8.6 billion during the second quarter, having added 3.3% in the first. Pimco Advisors LP built its bank holdings 10.63%, to $5.6 billion, in the second quarter, after reducing them 6.3% in the first.

A big buyer of thrifts was J.P. Morgan & Co., which increased its thrift investments by 17.24% in the second quarter, to $912 million.

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