Stocks: BT Rebounds; U.S. Bancorp Sinks on Downgrades

Bankers Trust Corp.'s depressed shares surged as much as 10% Friday on fresh merger rumors and an upbeat outlook offered by its management.

The New York bank surged $5.375, to $66.75, on triple the average daily trading volume. Most other bank stocks languished, led by U.S. Bancorp, whose shares sank 9%.

The Standard & Poor's bank index fell 1.72% and the Nasdaq bank index 0.90%. The S&P 500 slipped 0.72% and the Dow Jones industrial average 0.95%.

Analysts said Bankers Trust shares rose primarily on renewed speculation that Bankers Trust is talking with Germany's Deutsche Bank AG about a combination. Even Frank N. Newman, Bankers Trust's chairman, president, and CEO, seemed unable to quell the speculation.

"I wonder when I hear rumors that make no sense whatsoever how anybody who knows anything about the company could possibly believe any of this for an instant," Mr. Newman said to analysts during a conference call late Thursday.

Market experts, however, noted that a merger between the two companies was not out of the question.

"The rumor is strong because there might be some truth to it," said analyst Joan T. Goodman of Pershing/Donaldson Lufkin Jenrette Securities. "We never thought that a merger between Chrysler and Daimler-Benz could happen either."

Investors believe that Bankers Trust could be bought out at $68 to $75 a share. The Deutsche Bank-Bankers Trust rumor first took off last Tuesday on a report in the Financial Times.

Market experts said investors were also responding to a more optimistic outlook for Bankers Trust outlined by Mr. Newman. After "just awful" third- quarter earnings, the company is strengthening itself by cutting expenses and its exposure to emerging markets, Ms. Goodman said.

Bankers Trust also yields some of the highest dividends among banks in the United States, said Ms. Goodman, who calculated a 6.5% return.

"Eventually the earnings are going to turn around," she said. "I think they will turn around as soon as 1999."

Analyst Leslie Nelkin of Furman Selz LLC said he also is confident that the stock has hit the bottom.

After the conference call, investors realized Bankers Trust is in "a much better position financially than they thought," said Mr. Nelkin, who has a "buy" on the shares. "If the market can stabilize to some degree, the company can rebound quite strongly."

The plunge in U.S. Bancorp's shares followed downgrades from two major brokerages a day after the company announced disappointing third-quarter earnings.

BT Alex. Brown downgraded U.S. Bancorp to "market perform" from "buy," while Morgan Stanley Dean Witter cut the Minneapolis bank to "neutral" from "outperform."

U.S. Bancorp shares fell $3.5625, to $35.4375.

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