Japanese banks were the big winners on global stock markets over the last six months, and U.S. banks the big losers, according to the latest market capitalization survey of international financial groups.

Share prices for the 17 leading Japanese banks rose 40.5% in the six months that ended Sept. 30, according to an American Banker survey. (See tables on page 9.)

Sakura Bank Ltd., which announced a merger agreement with Sumitomo Bank Ltd., gained the most, followed by Fuji Bank Ltd., which recently announced a three-way merger agreement with Industrial Bank of Japan and Dai-Ichi Kangyo Bank.

In contrast, the market capitalization of top U.S. banks fell 12.4% over the same period. That was second only to Australian banks, which lost 14%. Among the heaviest losers were Bank One Corp, which lost 37%, and First Union Corp, which lost 34%.

The strong gains in Japanese bank share prices came after a steep fall in values stemming from concerns over how Japanese banks were going to deal with large problem loans. A surge in the yen's value against the dollar also boosted share prices in dollar terms.

But after receiving billions of dollars in recapitalization funds from the Japanese government, and with merger and restructuring activity speeding up, Japanese banks are increasingly being regarded by the markets as undervalued.

"Japanese banks fell a long way off their previous peaks and are bouncing off the bottom," said Lawrence W. Cohn, a bank analyst at Ryan, Beck & Co.

"U.S. banks are falling victim to rising interest rates," he said.

Mr. Cohn added that though he didn't see "a lot of downside left" in U.S. bank share prices, uncertainty over which way the U.S. economy is heading makes any big rise in U.S. bank stocks unlikely.

Despite the fall in market cap at many big U.S. banking companies, they dominated the top rankings, accounting for seven of the top 10 positions in market cap.

Citigroup Inc. headed the list, with nearly $149 billion as of the end of the third quarter.

American International Group, the diversified insurance and financial services company, ranked second, with nearly $136 billion, followed by HSBC Holdings PLC, the London-based bank, and Bank of America Corp.

Banking analysts noted that big market capitalization is the logical outcome of consolidation in banking, which remains highly fragmented compared with other business sectors, such as the automotive industry.

They added that though consolidation and a booming stock market in the United States have helped diversify U.S. financial institutions and propel them into a dominant position on world financial markets, there is no guarantee they will remain at the top of the rankings.

"Ten years ago Sumitomo Bank's market cap alone was bigger than that of several U.S. banks combined, and everyone predicted Japanese banks were going to take over the world," said Robin Monro-Davies, chief executive at the New York and London based rating agency Fitch IBCA Ltd.

"Just look at how the situation has reversed itself."

But he also suggested that it would be difficult to challenge U.S. financial institutions' increasing strength on world markets.

"U.S. banks have the world's biggest capital market as their launching pad," Mr. Monro-Davies said. "Their size, profitability, and expertise make them formidable competitors."

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