Bank stocks tallied respectable gains in the first half of the year, but they could not match the dramatic advances of last year.
Interest rate worries and investors' nagging doubts about the high cost of mergers were mostly to blame.
The American Banker index of the largest 225 banks in market capitalization climbed 12.5% between yearend and noon last Friday, versus a 16.88% gain during the first half of last year.
"Bank stocks seem to be just like the movies," said Christopher A. Bamman, a bank analyst at Advest Group in New York. "There aren't that many hits now."
Indeed, the sector last year seemed to attract investors as the screen epic "Titanic" attracted moviegoers. Then interest sank. Investors have shifted much of their attention to Internet and technology stocks, bank analysts said.
All the same, bank stocks as a group have performed "moderately well," said Lawrence W. Cohn, research director at Ryan, Beck & Co. in Livingston, N.J.
Large, globally oriented banks, which have led the sector, enjoyed a strong first quarter and then moderated, while the performance of smaller banks has been the reverse, Mr. Cohn said.
Big banks suffered in the second quarter amid rising rates, while smaller banks' stocks "showed some signs of life" because their valuations were too cheap to ignore, he said.
The top performers among the 225 largest banks were Republic New York Corp., up 51.9%; JeffBanks Inc. of Philadelphia, 48.7%; Citigroup of New York, 48.5%; Silicon Valley Bancshares of Santa Clara, Calif., 44.2%; and Western Bancorp of Newport Beach, Calif., 43.6%
Three of those five are being acquired. HSBC Group of London said on May 10 that it would buy Republic New York, Hudson United Bancorp said June 29 that it would buy JeffBanks, and U.S. Bancorp said May 19 that it would acquire Western.
Of the top five, the performance of Citigroup's stock is the most interesting, said Mr. Cohn. "The market really pummeled the stock last fall when the company was in troubled times," he noted.
Salomon Smith Barney, a unit of Citigroup, suffered significant bond- related losses during the fourth quarter as the capital markets became illiquid.
At the same time, investors got worried about the huge task of integrating Citicorp and Travelers Group after their merger, Mr. Cohn said.
"But then the company bounced back," he said. "First-quarter earnings were great, the environment for investment banking improved, and the capital markets returned to more normal trading levels."
Shares of the other non-acquiree, Silicon Valley, rose because of improving business operations, analysts said.
On the other side of the ledger, the biggest losers in the first half of year were Republic Security Financial Corp. of West Palm Beach, Fla.; Amsouth Bancorp of Birmingham, Ala.; First Union Corp. of Charlotte, N.C.; Centura Banks Inc. of Rocky Mount, N.C.; and Keystone Financial Inc. of Harrisburg, Pa.
Shares of Republic Security dropped 32.5%, Amsouth 24.2%, First Union 23%, Centura Banks 22.2%, and Keystone Financial 21.6%.
The downturns in three of the cases were merger-related. Since the beginning of the year, shares of acquirers have been beaten down by investors who have grown increasingly skeptical about bank mergers.
Shares of Amsouth had performed reasonably well until it announced plans June 1 to buy First American Corp. The stock has since been pounded severely.
Investors have likewise hammered First Union for missing earnings targets, because of problems largely related to the company's merger with CoreStates Financial Corp.