First Interstate Bancorp's stock surged Wednesday after the company announced a big increase in projected earnings for this year.

First Interstate said it expects to earn between $270 million and $280 million in 1992. It had earlier projected $220 million to $240 million in earnings. In 1991, the company lost $228.1 million.

The revised estimate and an earlier report by Salomon Brothers affirming its buy recommendation on First Interstate combined to raise shares of the Los Angeles company. As of 4 p.m., the shares were trading at $38.375, up $2.125 on the day.

Revision at Conference

The revised projection was unveiled at a banking conference in New York sponsored by Merrill Lynch & Co. Also at the meeting, Edward M. Carson, chairman and chief executive officer of First Interstate, noted that the company is considering making further acquisitions in Washington State, east Texas, and California.

Discussing the revised projection, a company spokesman said, "The driver [behind the revision] was our reduced nonperforming assets."

"This is a systemwide story for us," he added. "It's happening across 13 states."

The spokesman noted that the improvement was occurring despite continuing economic problems in California.

Analyst Expected Change

Ronald I. Mandle of Sanford C. Bernstein & Co. said the disclosure confirmed his expectations. He said the bank's projection of $220 million to $240 million in January turned out to be "extremely conservative" in light of reductions in nonperforming assets and reduced costs in the first and second quarters.

Christine McCarthy, the bank's investor relations specialist, said that after the bank disclosed in its second-quarter report that it might raise its earnings projection, analysts began to raise their estimates, from between $2.25 to $2.50 a share to between $3 and $3.25, a range that is consistent with the new projections.

The company said total credit expenses -- the loan loss provision plus foreclosed real estate -- are expected to be in the range of $480 million to $550 million, down from the original estimate of $570 million to $670 million. First Interstate's total loan-loss provision for 1991 was $810 million, while other real estate expenses were $310 million.

Targets Are Given

Nonperforming assets at year-end 1992 should be flat to down from the June level of $1.21 billion, the company said. At year-end 1991, nonperforming assets totaled $1.59 billion.

At the meeting, Mr. Carson said the bank wants to reduce nonperforming assets to 1% of total assets from 2.4% in the second quarter and a peak of 4% in the third quarter of last year.

Asked how First Interstate's business has been affected by the merger of California rivals BankAmerica Corp. and Security Pacific Corp., Mr. Carson reportedly said that the bank has picked up some customers, who were put off by the size of the new entity.

"I would rather compete with them than three or four aggressive savings and loans," he said. This was reference to First Interstate's experiences in Arizona and Texas, where thrifts bid up deposit rates and bid down loan rates in the 1980s.

Ms. McCarthy, the investor relations officer, said speculation that First Interstate would soon be bought by another bank has ended. One sign of this changes is that trading in its class-A common stock has virtually halted, she said. These shares, issued when First Interstate acquired a bank in Texas, used to pop up on speculation that the bank was about to be bought.

A Fallback Provision

The shares include a provision that make them worth $6 each if First Interstate is acquired by the end of this year. With a takeover impossible by that time, the class A stock will instead be converted into regular First Interstate common shares at an exchange ratio of 0.001 regular share for each class A share.

The gain in First Interstate's share price stood out Wednesday, as most bank stocks were narrowly mixed. The slow activity came despite continuing turmoil in the foreign exchange markets.

Britain raised interest rates and suspended its currency from the European Monetary System Wednesday. Some analysts think this dashes hopes that the Bundesbank will cut rates today. The news from Britain caused U.S. stocks to weaken near the close of New York trading.

BankAmerica Corp. was unchanged at $45.125; J.P. Morgan & Co. was up 12.5 cents, to $60.25; and NationsBank Corp. was up 25 cents, to $44.25. All had been stronger earlier in the day.

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