NEW YORK -- Regional bank stocks are being categorized on Wall Street as either sick or close to dead.
To say any shred of enthusiasm that once surrounded these issues has disappeared is to be generous.
MNC Financial Corp. may have won the increasingly competitive battle to be the dog of the month, but even banks with consistently good returns and continued independent affirmations of sound credit, such as Mercantile Bankshares, C&S/Sovran and First Wachovia have been hammered by investors.
"They are killing the good ones and the bad ones," remarked Lacy Shockley, an analyst at Smith Barney. "But they are killing the bad ones worse."
On average, regional bank stocks have lost about 45 percent of their value since the beginning of the year -- a number good only in comparison to the losses of two-thirds or worse suffered by some of the larger money-center banks such as Chase Manhattan and Continental Bank.
The devastation in the general stock market, off about 20 percent since August, looks almost palatable by comparison.
But averages don't paint a comprehensive picture. Though it is almost impossible to find a bank stock that has risen in value recently, those in the Farm Belt and Rust Belt haven't been rocked quite as hard.
Bank of Iowa, for instance, is only about 24 percent off its peak, and Banc One Corp. in Ohio is off about one-third. But East Coast banks from Florida to Maine have been devastated, and they continue to slide.
It is a curious fact that even with the mounds of bad news concerning loan losses and poor profits that already have riled the markets, there are still reservoirs of fear as fresh reports come to the fore.
Wednesday, NCNB, a North Carolina regional giant, announced that its earnings for the third quarter would be about half what had been predicted by analysts. Its shares fell $3.50, to $19.75, a 15 percent drop. Last September, they exceeded $55.
Typically, any industry can only suffer, or thrive, for a limited time before some form of normality returns.
MNC stock, which had fallen in the past year from $29.25 to as low as $5.875, actually has rallied a bit in the past two days to $6.25. The company still has an interesting credit card operation, and all of the nervous investors may have already left, along with the former chief executive officer, Alan P. Hoblitzell Jr.
Still, banks are extraordinarily complex entities, and more than one major investor has been burned trying to get in on the bottom, only to find the bottom is lower still.
One example is Bank of Boston (off from $27.875 to 7 7/8 ), whose shares rebounded modestly early in the year when the Tisch family of New York (controlling owners of Loews Corp. and CBS Inc., among others) bought in at what many conSee VIEW, 12F, Col. 1VIEW, from 1Fsidered bargain level. But the stock has fallen further since, and the bank released more bad news about loan losses Thursday.
Perhaps not surprisingly, given these results, few investors seem interested when some good news is presented by banks.
Earlier this year, Georgia-based Citizen & Southern and Virginia-based Sovran, which combined in August to form C&S/Sovran, both underwent extensive examinations by the U.S. comptroller of the currency and came out with fairly good report cards. Nonetheless, the shares of the new company are down the equivalent of 35 percent since the start of the year.
The week before last, Standard & Poor's Corp. reaffirmed Mercantile Bankshares' top rating for commercial paper, a good benchmark of a bank's underlying solvency. Charge-offs are negligible, earnings are good and a vast trust department annually coins money.
Mercantile's shares nonetheless have dropped 45 percent, closing Friday at $15. When, early last week, the stock price fell below $16, it crossed a notable threshold: For the first time since 1984, Mercantile's shares were valued below the book value of the bank -- an oddity, given that the continued affirmations of Mercantile's credit suggest its book value is real.
Equally striking is the experience of First Wachovia, a North Carolina bank that has become famous on Wall Street for its strict standards in extending loans. With no reports to suggest any problem exists, its shares are down 25 percent.
As occurs in any broad investor panic, some good deals for the brave will inevitably emerge, if they haven't already.
"I think we, as investors, will look back on present valuations a year or two from now, or maybe longer, and determine if we could have picked the right horse it would have been a landmark opportunity; the returns will be enormous," said John Burke, an analyst at Robinson Humphrey.
But which horse? Undermining any optimism is the certainty that any problem in a bank can fester for years. At the moment, bankers are crying the opposite, contending that bad experiences in Texas and elsewhere in the Southwest have led regulators and banking analysts to assume that the only good loan is no loan at all.