Chairman Edward E. Crutchfield of First Union Corp., one of the banking industry's most expansion-minded chief executives, has been stressing the virtues of prudent growth lately.

The message has been soothing music to investors, worried that the Charlotte, N.C.-based banking company is on an acquisition hunt again. But is this enough to boost First Union's stock price?

In a series of meetings last week and Monday, Mr. Crutchfield trumpeted the virtue of the "no-premium deal," suggesting that his days of snatching up companies at huge premiums are, at least for the time being, over.

Investors and analysts responded favorably. After meeting with Mr. Crutchfield, bank analyst Sandra J. Flannigan of Merrill Lynch & Co. raised her recommendation Friday to "accumulate/buy" from "neutral/buy."

"The current strategy is a major shift from any previous 'pledge'-and this time, we believe," Ms. Flannigan told clients.

Jim Schmidt, executive vice president of John Hancock Funds, who met with First Union's president John R. Georgius last week, agreed that the change in strategy is a good one. "Many investors have been nervous about the dilution First Union has taken on," said Mr. Schmidt. "I think the market will find this reassuring."

Mr. Georgius, explained Mr. Schmidt, said there were few banking companies of size that First Union wanted to merge with. However, recent deals have brought up possibilities.

The new Wells Fargo & Co. and the new Banc One would be options, the investor noted.

First Union's stock, however, has not budged much since Mr. Crutchfield began espousing the virtues of the no-premium deal.

As of Monday shares of the company had risen only 2.7% in the last five trading days. Analysts pointed out that First Union's price-to-earnings ratio also remains lower than its peers.

The market's skepticism is not unfounded. In January 1996 Mr. Crutchfield swore off major, out-of-market bank deals to focus on building the company's capital market capabilities.

"I think internal growth is going to be more of the answer than acquisitions," Mr. Crutchfield told American Banker in 1996.

A year later, he snapped up Signet Banking Corp. for $3.13 billion, brokerage firm Wheat First Butcher Singer for $491 million, and CoreStates Financial Corp. for $16 billion.

Although the acquisitions were all in-market, the dilution unnerved some analysts and investors.

"First Union has definitely taken on more dilution up-front compared to other banks," said portfolio manager A. James Ellman at AIM Funds. "However, the market has not realized that the dilution is the trade-off for fast growth."

Mr. Ellman, whose position in First Union is slightly less than $10 million, said he is "relatively happy" to hear that Mr. Crutchfield is considering a merger of equals. However, he is doubtful that Mr. Crutchfield's pricey acquisition days are over.

First Union can afford to take on dilution these days because of the substantial amount of cost savings that it reaps through technology, said Mr. Ellman. When the company has taken on dilution, it is only in the first year, he pointed out.

"It is likely that Mr. Crutchfield will hold off on all mergers before 2000 because of the year-2000 (computer) bug," said Mr. Ellman. "But if a cheap deal does not come along, they are likely to do" an expensive one, he said.

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