Investors flocked to bank stocks Friday in anticipation of strong third-quarter earnings and a future of low interest rates.

Observers say such optimism is prompting bank shareholders to raise their positions and attracting investors from other areas.

Investors in industrials have grown anxious about their sector as third- quarter earnings from blue-chip giants like Eastman Kodak, Motorola Inc., Micron Electronics Inc., and Aetna Inc. have proved disappointing, said traders.

"The multinationals are down on their estimates, so what's left?" said one trader. "Technology, energy, banks, and financials."

Meanwhile, the third-quarter outlook for banks is bright.

"We feel pretty good about the quarter," said bank analyst David S. Berry of Keefe, Bruyette & Woods. "We expect earnings growth in the mid- teens for most banks. At a time when (industrial) analysts are taking down estimates, bank stocks look like they will deliver the goods."

Credit quality also appears to be improving, said Mr. Berry.

Bank analyst Anthony R. Davis at Dillon, Read & Co. noted that many banking industry fundamentals have hit all-time highs, capturing the attention of investors. In the first half, he said, banks broke records in efficiency ratios, return on equity, return on assets, percentage of nonperforming loans, core deposits, and other areas.

Banks earned more in the last six years then they did between 1960 and 1990, he said. "Not many investors can turn away from that."

Indeed, even longtime bank investors are building up their positions in order to take advantage of double-digit earnings, strong credit quality, and industry consolidation.

A. James Ellman, portfolio manager for GT Global Financial Services Fund, said that investors still are willing to pony up more money for banks because they continue to be cheap compared with other stocks.

He pointed out that the three-year-old fund has grown 400% as investors look for places to invest in financials.

Another fund, the GT Global Theme Class, has grown more 150% since it was started a year ago, he added.

"We have gotten significant inflows into our financial funds,"said Mr. Ellman. "Clearly people want to put their money in financials."

Michael Hamilton, portfolio manager for the Princor Funds, which are overweighted in financials, said that there is a new bank investor on the horizon.

"You have two kinds of bank stock investors today," said Mr. Hamilton. "Investors who like banks as businesses and those that are just discovering them because of their performance."

After two days of slippage, bank shares outpaced the market Friday, with the help of a rally in bonds.

Bond prices surged on news from the Commerce Department that the nation's economy grew at a 3.3% annual rate in the second quarter, instead of the 3.6% that was estimated.

The Standard & Poor's bank index surged 1.59%, outpacing the Dow Jones industrial average, which rose 0.94%. The Nasdaq bank index grew 0.34%, and the S&P 500 jumped 0.78%

Some of the biggest gainers of the day include State Street Corp., which jumped $4.25, to $59.865; J.P. Morgan, up $2.81, to $113.93; and CoreStates, which rose $1.50, to $67.312.

In other news, National City Corp. bought back 790,000 of its shares as it moved forward with its buyback program.

National City's stock rose $1.125, to $61.68.

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