After a year in which they often set the pace, bank stocks seem to have lost momentum and are now at the mercy of the general market.

The banks fell Friday after a string of upgrades by Wall Street analysts failed to insulate them from a volatile day of general selling in equities.

"It's a pack mentality right now," said one trader on Friday afternoon.

The Dow Jones industrial average stumbled 1.15%, hurt by a convergence of yearend profit taking, continued instability in Asia, and the "triple- witching" effect of stock option expirations. The day was punctuated by a steep morning plunge, a rally in early afternoon, and resumed selling until the closing bell.

Investors are "taking gains, putting 1997 to bed, and looking to 1998 for a fresh perspective," said Anthony R. Davis, banking analyst at SBC Warburg Dillon Read.

But he and other bank analysts were nevertheless taken aback by the sharp selloff of bank shares. "We strongly disagree with the betting by portfolio managers in that regard," Mr. Davis said.

Among the biggest decliners, Bankers Trust fell $3.125, to $117.875; Chase Manhattan Corp. was down $1, to $108.125; and J.P. Morgan was off $2.875, to $116.

The shares of regional and community banks were also pelted. First Commerce Corp. was down $1.5625, to $67.50; Mercantile Bankshares fell $1.0625, to $36.625; and Star Banc Corp. shed $1.25, to $55.375.

The Standard & Poor's 500 stock index was off 0.90%, the S&P bank group dropped 1.58%, and the Nasdaq bank index fell 0.21%.

Banks were clobbered despite a spate of upbeat reports about the industry and individual institutions. Fears about profit hits from Asian operations and a slowdown in the domestic economy predominated.

Bank stocks' merger attraction even seemed on the shelf for the day. That perplexed Michael L. Mayo of Credit Suisse First Boston Corp., who insisted the industry remains in the midst of a "once-in-a-lifetime" consolidation pace that is bound to propel share prices higher.

Indeed, Citicorp earned praise for its agreement last week to buy the credit card portfolio of AT&T Corp. for $3.5 billion.

"The transaction clearly creates shareholder value," asserted analyst Nigel P. Dally of Morgan Stanley Dean Witter. He reiterated a "strong buy" recommendation on Friday, saying shares could reach $166 within 12 months.

Moreover, Citicorp's Asian woes appear to be limited, said analyst George Bicher of BT Alex. Brown. He raised his fourth-quarter and full-year estimates for the company. But shares still fell, by 93.75 cents, to $128.1875

Bank of New York Co. is actually gaining from the volatility overseas, said Katrina Blecher of Gruntal & Co. Aside from possible short-term trading losses, Bank of New York is seeing a stepped up interest by overseas companies' in issuing American depositary receipts.

Moreover, foreign exchange operations are picking up "because many accounts are moving to higher-quality institutions," Ms. Blecher said.

Following a meeting with Bank of New York management last week, Ms. Blecher reiterated a "strong buy" recommendation, and Judah S. Kraushaar of Merrill Lynch & Co. repeated a "buy" recommendation Despite the upbeat assessments, shares fell $3, to $55.50.

FirstPlus Financial Corp. managed to buck the market's strong downdraft by gaining $4.5625, to $33.625, after disclosing plans to end gain-on-sale accounting methods that make income assumptions about loans before they are sold.

And several banks won new fans on Friday, with the support producing mixed results.

Bank United Corp. rose 75 cents, to $45.75, after Kenneth A. Posner of Morgan Stanley Dean Witter began coverage with an "outperform" rating.

Shares of Northern Trust dipped 25 cents, to $65.875, after Thomas Hanley of UBS Securities began coverage with a "buy" rating.

Among smaller institutions, Highland Bancorp stayed at $32.75, and Pacific Crest Capital dropped 50 cents, to $18.25, after Campbell K. Chaney of Sandler O'Neill & Partners reiterated "buy" ratings.

Pacific Crest is an example of a smaller institution that has "stuck to its position and not overly competed for loans based on price," Mr. Chaney said. "This has slowed origination activity, but has protected the net interest margin."

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