Bankers may moan when the stock of their institution slumps, but in many cases that's about all they can do.

One would think that building earnings, curbing expenses, and otherwise making the bank more efficient should bring with it a better stock price.

But this is not always so. Sometimes just when a bank's performance is improving some analysts and money managers turn sour on the stock, and their views lead to sales that push down the multiple and the share price.

Some banks have tried to tackle this problem by courting the analysts. But this can be a dangerous route.

The professionals often listen to the bank's story and hype the stock for a while, but withdraw their support when they feel that all the immediate gain in share price has been realized.

Making People Unhappy

Then the stock falls back to its previous multiple, leaving behind an unhappy group of investors who bought at the high, as well as unhappy employees whose options were based on the higher price.

Some bankers have found that there are more effective steps.

For a bank whose shares are traded over the counter, one way is to cultivate its market makers.

They should be kept well informed and given an opportunity to bid on all stock offered for sale (not just the blocks that insiders don't want for themselves, as so often happens with a thinly traded stock). The market makers will then be likelier to bid confidently for shares that become available.

But the most effective immediate step a bank can take to improve its share price and multiple is to buy back the stock itself for a dividend reinvestment and direct purchase program.

Helping the Market Makers

Dividend reinvestment programs aid the stock for two reasons.

* First, the programs create a market for the shares.

* Second, because market makers know there will be a major customer waiting to buy the bank's shares every quarter, they will be more aggressive in making a market for the stock in the interim.

The dividend reinvestment program removes the market maker's fear of being stuck carrying shares with no potential buyers in sight except at sharply reduced prices.

Bankers who undertake dividend reinvestment programs often could be smarter about them, however. Too many banks always buy for shareholders on the same pattern, and therefore pay more than necessary.

Savvy market makers would say to themselves: "This is the 17th of March, and the dividend reinvestment purchases of Schmidlap National Bank are coming in today." And they would price accordingly.

Staggering the Purchases

To avoid being stuck with a market price that jumps in anticipation of these quarterly purchases, a bank should buy shares for the reinvestment program when they seem especially cheap.

In other words, looking for a window is far preferable to buying at a set time every quarter.

In this regard, bank timing should be like that of the corporations that have changed dividend payout days from Jan. 1, April 1, July 1, and Oct. 1 to less popular days.

Cash for dividend payouts is normally parked in the liquid investments that mature on these dates, so such investments need not yield as much as those coming due at other times.

The company with the irregular dividend date thus can get a higher return on the money being stored for quarterly payments.

Direct Buyback Possible

The other means of influencing the share price is, of course, a direct repurchase to reduce the number of outstanding shares.

Many bankers believe that when their share price is below book, there is no better use of bank funds than to buy in the stock and thereby heighten the leverage for the remaining shareholders.

But again, timing is important.

One approach that looks great at first is the dutch auction.

In this approach, the shareholders are offered the opportunity to sell back their stock to the bank at a range of prices. The bank then accepts the tender offers from the lowest price, then the next lowest, and so on until it gets all the shares it sought.

But this has its dangers. The bank gets the stock at the lowest price available at the time. But in some cases it may have to choose between paying unattractively high prices to meet its quota or leaving the quota unfilled.

This helps explain why so many banks use a straight fixed-price tender, allocating purchases if too many shares are offered. But if few shareholders accept, the repurchase falls short of its goal.

The irony is that it takes a solid capital position to do a buyback program, so the banks that are doing best in their operations are the ones able to do even better for their shareholders by buying back shares.

A buyback, if feasible, makes great sense if a bank's share price does not reflect book value and earning potential.

If you have faith in your bank, there is no better investment for its funds than buying its stock at bargain-basement prices.

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