Magazine article American Banker

Bank Stocks Shut out of Dow 10,000 Celebration

Magazine article American Banker

Bank Stocks Shut out of Dow 10,000 Celebration

Article excerpt

The much-awaited 10,000 milestone reached this week by the Dow Jones industrial average did not raise the pulse rate of veteran bank stock investors.

Though bank stocks mostly fare better in a rising market, they do not necessarily follow the lead of the blue chips in the Dow index.

This year offers a dramatic illustration. The Dow is up 8.9% while the American Banker index of the nation's 225 largest bank stocks is nearly unchanged.

"So far, 1999 has not been a great year for investors unless you've been in the right half-dozen stocks," said Miles P.H. Seifert, chief investment officer of Gray, Seifert & Co., a unit of Legg Mason Inc.

"The banks have mostly been flat, but history has taught me that the first quarter is normally the worst part of any year for these stocks, while the second and fourth quarters are often quite good," he said.

"This year, many analysts seem not to have believed bank managements who say they have no earnings problems in 1999," he said. "As a result, a lot of fund managers are waiting for a look at first-quarter earnings results."

Stephen Berman of Stein Roe & Farnham, the investment adviser and manager, said banks have been off investors' radar screens during the recent run-up. "The market overall has been a narrow market, focused on a few of the bigger stocks, and that has hurt banks."

Mr. Seifert thinks bank stocks will again follow the typical pattern and do better as the year moves along, "assuming no major changes in the level of interest rates."

A longtime bull on the banking sector, he has stakes in 60 banks on behalf of clients, including Zions Bancorp., State Street Corp., SunTrust Banks Inc. and Marshall & Ilsley Corp.

Mr. Berman expects bank stocks to regain some momentum with the help of good second-half earnings and a resumption of stock repurchase efforts. …

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