A sizzling summer stock rally pushed the market value of the nation's 100 largest bank holding companies past three quarters of a trillion dollars.
Despite periodic rate scares, investors are still drawn to banks because of the strong economy and bank consolidation and steady earnings growth.
"This trend suggests that the top U.S. banks will eventually possess among the largest market caps in the world" among financial services companies, said James J. McDermott Jr., president of Keefe, Bruyette & Woods Inc.
Citicorp again placed first, with $61.3 billion of market capitalization on Sept. 30. BankAmerica Corp. was second, with $51.4 billion, closely followed by Chase Manhattan Corp. at $49.9 billion and NationsBank Corp. at $48.1 billion.
Market capitalization of the largest 100 banks was $769.6 billion, a gain of 12.1% during the third quarter. (The banks and their market values are listed on page 26.)
That is a long way from the paltry $101.4 billion to which the top 100 had plunged at the end of 1990, amid the industry's worst credit crisis since the Great Depression.
Indeed, the third quarter was the 11th straight period in which these banking industry leaders added capitalization. The last time the value of the top 100 fell was in late 1994, when the Federal Reserve raised rates.
Shifts in the industry's market capitalization are influenced by overall stock market trends, but they also indicate how investors feel about banks' business strategy and management, and the economic conditions under which they operate.
"As long as rates, particularly long-term rates, do not rise and the prices of the largest acquiring banks don't fall out of bed, I think you will see the trend continue," said industry analyst John J. Mason of Interstate/Johnson Lane.
No bank illustrates the huge market advance of the industry during this decade more than New York's Citicorp. Citicorp was also the largest in the late 1980s, but fell to 13th on the list after loan and capital problems struck. It regained the top spot in the first quarter of 1994-with a now- smallish value of $14.6 billion.
"We are probably around two years and one or two large (acquisition) deals away from a U.S. bank moving into the top five financial services companies on a global basis," said Mr. McDermott.
He said gains in banks' capitalization in this decade also signal that the industry's share of the total financial services market is no longer shrinking after years of losses, and may even be getting a bit larger.
"As banks use their market power to buy investment banking companies, asset management companies, consumer finance companies, and others, they are beginning to recapture the customer base that walked out on them over the past two or three decades," Mr. McDermott said. "So what goes around comes around."
Citicorp's market cap rose 11.4% in the quarter, while BankAmerica's jumped 13%. Together, the two largest banking companies now have a larger market value than the entire top 100 possessed seven years ago.
Chase Manhattan Corp.'s market cap was up 20.9%, while NationsBank's fell 4.2%. New to the top five was First Union Corp. at $28.3 billion, up 7.1%.
Slipping from the top 10 to 11th position was J.P. Morgan & Co., which ranked first in market value at the beginning of the decade. Morgan, whose strategy is oriented more to investment banking than those of other banks, had Sept. 30 market value of $20.3 billion, up 5.3% in the quarter.
The largest gainer in market value was Signet Banking Corp., up 51.1% to $3.2 billion. The rise reflects its pending acquisition.