Investors' love affair with bank stocks has noticeably cooled in recent months.

The mania for electronic commerce shares, combined with the absence of banking megamergers and a series of unclear fourth-quarter earnings reports, has tempered enthusiasm for virtually all financial stocks.

It's a stark change from the days when the word "bank" had the panache that ".com" carries today among investors.

"Three or four years ago, if a company had the name 'bank' in it you made money on the stock one way or the other," said Scott Edgar, director of research at SIFE Trust Fund, which invests primarily in financial stocks.

"Either earnings would be good and the stock would rise, or they'd fall short and the company would get taken out. That dynamic certainly does not exist now, and it doesn't appear it will return in the immediate future-not until after 2000."

Bank stocks have lagged the market since the Standard & Poor's 500 hit its 1998 low on Aug. 31. Since then the S&P 500 has risen 30.4%, while the S&P bank index has risen only 14.3%.

Banks led the market downward Thursday, with the S&P bank index falling 2.7%. The Dow Jones industrial average fell 62.3 points, to 9304.5.

Banks have failed to snap back from last summer's selloff as quickly as the rest of the market, because investors see few ways for banks to increase earnings, outside of mergers.

"It's not a bullish sign when it looks like the only way to grow earnings is by increasing market share. That can't go on forever," said Arthur Hogan, chief market strategist at Jefferies & Co.

Merger fever has subsided almost entirely since last July. With bank stocks performing poorly, bankers are reluctant to use them as currency to finance costly acquisitions.

Until merger mania returns, Mr. Hogan said, bank stocks are likely to return to more traditional earnings multiples.

But what should those multiples be? Bank stock multiples are typically one-third lower than the average company on the S&P 500. With the average S&P 500 stock trading for 33.7 times earnings, investors find it hard to justify paying a multiple in the mid-20s for stocks as sensitive to domestic and foreign economic fluctuations as banks.

Until the market sorts out which stocks are inflated in price and which are fairly valued, some pros are advising investors to step back a bit from stocks. On Thursday, J.P. Morgan & Co.'s market strategist Douglas Cliggot recommended that investors reduce their exposure to stocks to 50% of their portfolio. His previous "model portfolio" had allocated 60% to stocks.

Even usually active players like Mr. Edgar are sitting on the sidelines.

Mr. Edgar said he likes such stocks as Bank of New York Co. and Wachovia Corp., but would hesitate to buy much until the market settles down and he can better gauge which companies are undervalued.

That said, the outlook for bank stocks is better than for many other sectors, Jefferies' Mr. Hogan says.

"Banks are going to continue to make money. It's not like the oil stocks, which aren't doing well because people aren't using the product like they used to. People are still going to banks," he said.

Among the few financial stocks showing any signs of life nowadays are brokerage stocks, which have revived from last year's doldrums because of investors' frantic search for anything related to electronic commerce.

For example, shares of Southwest Securities Group, a Dallas-based firm whose subsidiaries include an on-line brokerage, have risen 132% since Dec. 24. Its stock closed at $35.125 Thursday.

But though the market may consider this company a "technology play," Southwest gets most of its revenue clearing trades for other firms, said spokesman Jim Bowman.

Mr. Bowmnan said he didn't mind that investors value his company like an Internet stock. "It's nice when something like this happens," he said.

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