Asserting that the bank stock correction has gone too far, a Wall Street bear raised ratings on five large banks Monday.

Francis X. Suozzo of S.G. Warburg & Co. had downgraded the industry's shares two months ago near the peak of their rally.

Bank stocks have plummeted since mid-April, as investors, fearing the impact of interest rates and inflation on the industry, sold their holdings.

"With many stocks having come down 10% to 20%, it appears that valuations now reflect the realities more closely," Mr. Suozzo said.

Mr. Suozzo raised his rating on First Union Corp., Charlotte, N.C., to "buy" from "add," and his recommendation on Fleet Financial Corp., Providence, R.I., to "buy" from "hold."

He also raised ratings on NationsBank Corp., Charlotte; National City Corp., Cleveland; and NBD Bancorp , Detriot, to "hold" from "reduce".

However, negative sentiment toward bank stocks continued on Monday, with most major stocks falling.

Says View Is Unchanged

Henry Coffey of J.C. Bradford & Co., Nashville, reduced ratings to "near-term accumulate' from "near-term buy" on Crestar Financial Corp., Richmond, Va., First Tennessee National Corp., and Union Planters Corp., both of Memphis.

In making his recommendations, Mr. Suozzo said he has not changed his view that sluggish revenue momentum and increased will be the rule for the margins will be the rule for the rest of this year.

Among the five stocks he recommended on Monday, First Union was off 50 cents to $43; Fleet was up t to 50 cents to $30.375; Nations Bank was off 25 cents to $45.75 cents to $47.50; and NBD 37.5 cents to $47.50; and NBD was unchanged at $30.375.

The previous ratings were set on March 17. Mr. Suozzo warned then that banks were "at or near" historical peaks on a price-to-earnings basis.

Plateau in Late March

The stocks plateaued in late March and then fell back sharply on profit talking after first quarter earnings were announced.

Recently, bank issues have weakened anew on worries that inflation is resurgent and interest rates will rise, squeezing bank margins.

Mr. Suozzo said investors in bank stocks had been "caught up in the excitement" of loan-loss provisions coming down and margins expanding to historic levels as interest rates fell.

Four with Earnings Potential

These factors, he said, have been "driving positive surprises" in every quarter for bank stocks. But the analyst said a number of banks have reached the point "where their reported earnings are now about equal to their earnings power."

He named four banks whose loan-loss provisions can still be reduced enough to push earning: Fleet, First Interstate Bancorp, Citicorp, and Chemical Banking Corp.

Chemical slipped 50 cents to $36.125 in Monday trading, while First Interstate fell 12.5 cents to $53.875.

The analyst has "buys" on those stocks as well as on chase Manhattan Corp., which he views as being in the midst of a turnaround. Chase was off 12.5 cents to $28.875 in late trading.

Mr. Coffey of Bradford is retaining long-term "buys" on the stocks. "The factors driving these stocks are more long term in nature, and I wanted to add that focus to our list f recommended stocks."

Crestar on Monday was down 37.5 cents t $35.75, First Tennessee was up 37.5 cents to $38.75, and Union Planters was down 37.5 cents to $25.

Mr. Coffey has both short-term and long term "buys" on South Trust Corp., Birmingham, Ala.; and First Commerce Corp., New Orleans. South Trust was unchanged at $27.75 on Monday, and First Commerce was up 25 cents to $36.

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