Bank stocks may recently have fallen to bargain levels, but don't look for many banks to wade into the market as buyers of their own shares.
A host of major banks and many regional institutions are in pending mergers and have suspended repurchase programs.
That hardly mattered when bank stocks were soaring. High-flying stocks had already cut into the popularity of buybacks, with some analysts questioning the practice as a capital management tool.
The nation's top 25 banking companies cut repurchases to $2.9 billion in the second quarter, from $3 billion in the first three months of the year. That was off sharply from $7.5 billion in the second quarter last year, according to Keefe, Bruyette & Woods Inc.
Now, with a much softer equities market, banks would probably like to be buying back. Such moves support stock prices outright and also raise earnings per share, which enhance relative valuations.
"The big guns are still out of the game," said Marni Pont O'Doherty, a Keefe analyst. "It's tough luck for some of these banks. While it is a great buying opportunity, many have handcuffs on."
Those currently out of the buyback loop include New York's Citicorp, which is heading toward a merger with Travelers Corp., and Banc One Corp., scheduled to acquire First Chicago NBD Corp.
And so the dwindling of bank buyback programs continues, said Ms. O'Doherty. Second-quarter buyback activity was boosted by First Union Corp.'s repurchase of $1.9 billion worth of shares during their purchase of Money Store Inc.
But, she said, "if you take that transaction out, repurchase activity would be $1 billion. That kind of repurchasing is a non-event."
All this is a huge change from three years ago, when analysts were trumpeting buybacks as one of the best capital allocation strategies around and banks were busy setting industry records for repurchases.
But buybacks are not going to disappear.
"There will likely be a pick up in the third or fourth quarter," said Ms. O'Doherty.
"The pullback in bank stocks is a great point for the banks to restart the process," said bank analyst Eric E. Rothmann of Stephens Inc., Little Rock.
As consolidation slows down because of the computer-related year-2000 issues, "there is more potential for banks to use their excess capital to repurchase stock," Mr. Rothmann said.
In one of the largest recent announcements, U.S. Bancorp said June 9 that it would repurchase $2.5 billion of its stock. And analysts believe Chase Manhattan Corp. and North Fork Bancorp plan to announce buyback programs soon.
Meanwhile, bank stocks declined in Thursday trading as negative news emanating from Russia shook the market.
The Standard & Poor's bank stock index fell 1.61% and the Dow Jones industrial average 1.09%. The Nasdaq bank index tumbled 1%, and the S&P 500 fell 0.86%.
Losers of the day included Citicorp, which fell $7, to $140.125; J.P Morgan Co., down $1.25, to $117.25; and Bankers Trust Corp., down $1.625, to $99.