Shares of Fleet Financial Group advanced for a second straight day as merger speculation returned.
Fleet's stock closed at $40.625, up $1.5625, on trading volume reminiscent of last summer's, when the company was seen as a prime takeover candidate. The activity-2.1 million shares traded hands Tuesday after 2.4 million on Monday-easily topped the stock's 1.7 million average.
The surge of investor interest "is clearly worth making note of," said Susan Flischel, portfolio manager at Countrywide Equities Fund.
She and other portfolio managers said Fleet-one of the most talked-about merger candidates, along with J.P Morgan & Co.-warranted monitoring.
Though no deal materialized, market watchers said the action and recent spurts for other bank stocks could signal a fresh round of takeover talk for financial institutions, after a lull in recent months.
"Many are ripe for the picking" in what remains an overbanked industry, Ms. Flischel said.
Investors may have been thinking along merger lines Tuesday, as buying and selling action was particularly fervent. Chase Manhattan Corp., Summit Bancorp, and SunTrust Banks Inc. all traded more shares by midday then they usually do in a full day.
The action was in keeping with the path that bank merger speculation usually takes-starting with regionals, then progressing up the list.
Ms. Flischel sees Huntington Bancshares, Provident Bancorp, and KeyCorp as prospective candidates for a larger institution looking to build its regional clout.
"You still have a chance for a burst of bank-buying activity before the year ends," said Michael Mayo, banking analyst at Credit Suisse First Boston.
But prices will not approach last summer's large premiums, Mr. Mayo said. "The days of paying 35% over the share price are going to be much less frequent."
He cited a coming economic slowdown and companies' costs to outfit their computer systems for 2000.
"In short, the acquirers will have to take on more risk than they have in the past," Mr. Mayo said.
Others said the high trading activity may be nothing more than speculators getting in and out quickly as they chase market rumors.
"I've not been able to figure out for myself," said Katrina Blecher, banking analyst at Brown Brothers, Harriman & Co.
Fleet, for example, "has tended to be a rumor stock, and maybe that has not changed," Ms. Blecher said.
For the day, the Standard & Poor's bank index rose 1.71%, and the Dow Jones industrial average was up 1.47%. The Nasdaq bank index added 0.70%, and the S&P 500 was up 1.89%.
