Banking Industry Is Holding Its Own

Article excerpt

THE banking industry - despite loan-loss problems for some institutions - appears to be in a favorable position to profit from the economic recovery under way throughout the United States.

Since the beginning of 1992, US bank stocks in general have outperformed most stock market indexes. A number of banks have watched their highly depressed stock values soar, including First City Bancorp, MNC Financial Corporation, Continental, and Citicorp; those stocks have risen more than 50 percent since the end of last year, according to Prudential Securities Inc.

In addition, nonperforming assets such as bad loans are declining throughout the industry. Mergers are creating larger and better capitalized institutions: The latest merger occurred last week when Ohio-based Banc One agreed to buy Valley National Bank of Arizona for stock worth $1.2 billion.

Besides benefiting from the improving economy, most banks are breathing a sigh of relief that the industry has not been hurt by the downturn in the Japanese stock market. In past weeks there has been speculation that some US banks with special ties to Japanese institutions might be hit by the current travail of Japanese banks, which have incurred substantial losses on the Tokyo exchange.

In fact, the share prices of one or two large US banks initially dipped on the unhappy news out of Tokyo. But those US stocks have recovered.

"The few US banks that might possibly be affected are large money-center banks," says Joseph Roberto, a bank analyst with Advest Inc., a financial house. "Regional banks should not be adversely affected by Tokyo's problems."

Moreover, concerns that the financial problems of real estate magnate Olympia & York might damage some US banks also appear to be waning.

Little wonder then that many analysts now mull the possibility of a strong year for the banking industry. Bert Dohmen, publisher of "The Wellington Letter," in Honolulu, says that regional banks and savings and loan associations may represent one of the hottest sectors for investors. …