The stellar earnings reports released in the past two weeks failed to light a fire under bank stocks, leaving money managers worried about the sector's fate in August's doldrums.

"Investors are skeptical about bank earnings," said Miles P.H. Seifert, chairman of Gray, Seifert & Co., New York money managers. "Many think that the earnings are interest related and have nothing to do with the operations of the banks."

In the five trading days that ended last Thursday, the American Banker index of bank stocks and the Dow Jones industrial average both fell about 0.7%.

Bank shares were narrowly mixed on Friday, while the Dow Jones industry average rose 21.52 points to 3,546.74.

A Step Upward

That uninspired performance was an improvement from the previous week, when the first wave of earnings reports came out. Between July 12 and July 16, the American Banker index plunged 1.76% while the blue-chip index inched up 0.2%.

Citicorp, Nationsbank Corp., Bankers Trust New York Corp., and Chemical Banking Corp. were among the dozens of banks that last week reported earnings gains of at least 20% from a year earlier. That was a much better showing than most nonfinancial corporations, money managers said.

Federal Reserve Board Chairman Alan Greenspan's tough talk on interest rates last week nixed any chance for bank stocks to rise on the earnings. Mr. Greenspan, delivering his Humphrey-Hawkins testimony to Congress, indicated last week that a rise in short-term rates is in the cards.

Earlier Selloff Due to Rates

It was concern about rising rates that sent bank investors hurrying for the exit in mid-April. The prolonged selloff dragged bank stocks down an average of 15% in six weeks. Higher rates, many investors thought, would raise bank's cost of funds and cut into profits.

Mr. Seifert and others said earnings growth is sustainable even if interest rates rise modestly. Indeed, banks have been telling money managers that the third quarter should be good, too.

The level of nonperforming assets fell for most institutions last quarter. A handful went so far as to lower their quarterly contribution to loan-loss provisions. Some banks reported an uptick in lending for the first time in three years.

Damage Control

Last week's selloff was mild, compared with other recent periods. For the past five quarters, bank stocks have fallen sharply after earnings announcements. So far, bank shares appear to be bucking that trend by holding the losses down.

Other sectors have been much more volatile recently. Investors have sold off consumer products companies, bashed pharmaceuticals, and decimated technology stocks.

"Bank stocks are an area of relative stability in a market that is unsure," said David Dreman of Dreman Value Management. "The earnings certainty seems to be higher."

But the August doldrums loom. One trader said that with no more good news expected for a while, bank shares may continue to drift down.

Broader Market Sluggish

The overall market doesn't appear lively, either.

"I think the market as a whole looks really tired and choppy," said Tucker Andersen, a principal with Cumberland Associates, a New York money management firm. "To expect banks to rally in the face of that is a tough call."

But money managers and analysts believe that bank stocks will rally again before the year ends.

"I think the banks will continue to do well, even if they don't do so immediately," Mr. Dreman said.

"The outlook is reasonably good for 10% earnings growth for some time, and you can't say that about many other industries."

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