Major banks chalked up another $35.2 billion gain in market value during the first quarter, but the rate of increase was slower than in last year's bull market.

Concerns about rising interest rates, confirmed by the Federal Reserve's recent credit tightening move, along with nagging fears about credit quality are seen as the likely main reasons for banks' shortened stride at the end of the quarter.

The aggregate market capitalization of the nation's top 100 banks was $581.5 billion at March 31, up 6.44% from yearend, according to the quarterly American Banker survey. (Tables are on page 21.)

By contrast, these banks appreciated 8.64% in value during the fourth quarter last year and by 10.75% as their stocks soared during the big late- summer rally of the third quarter.

Whether the spectacular expansion of the banks' market value in recent years can continue is being debated on Wall Street. Some industry watchers are optimistic; others, cautious.

"The banks' stronger financial condition and higher expected growth rates could let these stocks perform better than in prior periods of rising rates," said analyst George M. Salem of Gerard Klauer Mattison & Co., New York.

If the overall stock market continues to move up, he said, he believes bank stocks will outpace the market. "If you've got the fundamentals on your side, you're more than halfway home," Mr. Salem said.

However, analyst Frank W. Anderson of Stephens Inc., Little Rock, Ark., emphasized that "bank stocks historically do best when rates are stable or falling." With rising rates, the opportunity cost of owning bank stocks also goes up for investors.

"For two years, the financial and technology stocks have been the main forces driving the market higher. The altered rate environment has portfolio managers "asking how much better things can get," he said.

"Portfolio managers look at relative risk," Mr. Anderson said. "If they see a 10% to 15% further upside potential in bank stocks, but with the same amount of downside risk, they go looking for a sector with 40% upside and 20% downside. Their job is to beat the S&P 500."

Specifically, he said, the fear is that, as rates go up, banks' net interest margins will ultimately come under pressure-and that asset quality will deteriorate in an economic slowdown or recession.

Meanwhile, at the end of the first quarter, the industry's market capitalization clearly shows the big banks getting bigger.

New York's Citicorp extended its lead as the nation's largest- capitalization banking company with market value of $49.4 billion at March 31, up 14.2% for the quarter.

Chase Manhattan Corp. occupied second place. It topped $40 billion of market value during the quarter, up 4.8%. BankAmerica Corp. held on to third place, at $35.8 billion, up 1.13%.

Signaling just how much the banking industry has risen in Wall Street terms during this decade, the top three banking companies now have combined market value of $125.6 billion. That is significantly more than the $101.4 billion for the entire top 100 at yearend 1990.

But in a sign that momentum has begun slowing, only 80 of the top 100 banks posted market-value gains in the first quarter, versus 96 in last year's explosive third quarter.

Within the top 100-a group that itself changes according to capitalization and mergers-the largest mover in the top quartile was Barnett Banks Inc., Jacksonville, Fla., up 24.5% to a market value at March 31 of $9.3 billion.

Some of that gain could be due to takeover speculation in the wake of First Bank System Inc.'s March announcement that it would buy U.S. Bancorp, Portland, Ore., and NationsBank Inc.'s January acquisition of Boatmen's Bancshares. The deals leave Barnett as one of the nation's few remaining "trophy franchises" in banking.

"We think Barnett could very well be next," said banking industry analyst Kathryn H. Bissette of Sterne, Agee & Leach Inc., Birmingham, Ala.

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