Two Wall Street firms flashed danger signals Monday about BankAmerica Corp. shares.

George M. Salem of Prudential Securities Inc. issued a "sell" rating based on a gloomy earnings outlook.

And Raphael Soifer of Brown Brothers, Harriman & Co. reduced his 1993 estimate of earnings per share to $4.65, from $5, but kept his rating on the company at "neutral."

Price Drops $1

In late trading, shares of the San Francisco banking giant were off $1, to $42, amid a sharp selloff of banking issues.

Bank stocks fell by 2.6% Monday on worries about higher interest rates. By comparison, the Dow Jones industrials fell 0.4%.

Mr. Salem said he remains pessimistic on California's economy. The company's latest quarterly report to the Securities and Exchange Commission indicates growing pessimism among its management as well, he added.

The analyst said that BankAmerica suggested in its quarterly SEC report that neither loan losses nor nonperforming assets would decline this year, implying that the loan-loss provision "is unlikely to decline and could rise from the first quarter's $235 million."

BankAmerica spokesman Peter Magnani declined to comment on Mr. Salem's "sell" rating or on his characterization of management "pessimism."

Mr. Salem noted that total loans at the bank are declining at an annual rate of 11%. He cut his 1993 earnings estimate, to $4.25 a share, from $4.40, which would be only a slight rise from last year.

'94 Estimate Cut, Too

More strikingly, he slashed his 1994 estimate, to $4, from $5.25, meaning he anticipates a 6% decline in profits at the bank next year.

Mr. Soifer of Brown Brothers reduced his 1993 earnings estimate but left his 1994 estimate of $5.50 per share unchanged.

Both analysts said Wall Street's earnings estimates for the company are too high. The consensus estimates, according to First Call Corp., are $4.96 this year and $5.82 next.

In issuing his "sell" recommendation, the Prudential analyst said he sees the risk of a pullback "to the $34 range" in BankAmerica's share price during the next 12 to 18 months, a possible 20% decline.

Loan Shrinkage Noted

Mr. Salem's somber earnings assessment is based "primarily on shrinking loans and fee income plus higher-than-expected loan losses, loss provisions, and nonperforming assets."

Mr. Salem said he recently "learned from the company" that, after falling $3 billion in the first quarter, loans declined roughly another $3 billion in April and May. "This trend could continue indefinitely through 1994, at least, and it implies a direct reduction in net interest income and net interest margin," he said.

If not replaced with other assets, the 11% rate of decline in loans "would reduce earnings by about $1.10 per share, equal to 22% of the 1993 Street estimate," Mr. Salem said.

The analyst noted that a bank's loans outstanding are a "direct reflection of the economy it serves" and added that he views California as "only halfway through the economic pain" the state must ultimately endure.

Mr. Salem said he did not think declining revenue could be offset by a declining loan-loss provision or merger cost savings.

The analyst's somber outlook for the Golden State led him to drop coverage of Wells Fargo & Co., saying its buoyant stock performance this year was inexplicable.

Mr. Soifer, however, while saying California's economy remains troubled, raised his 1993 and 1994 estimates for both Wells Fargo and First Interstate Bancorp. But he remains "neutral" on both.

Wells Fargo shares fell $5.25, to $95.75, on worries about business conditions in California. The concerns also caused First Interstate to fall $2.50, to $53.75.

But the damage was general.

Bank of New York Co. fell $2.125 a share, to $52.25; First Union Corp., Charlotte, N.C., $2, to $40; and Barnett Banks Inc., Jacksonville, Fla., $1.375, to $43.50.

Banc One Corp., Columbus, Ohio, slipped $1.625 a share, to $51.375; Bankers Trust New York Corp., $1.75, to $69.875; and First Bank System, Minneapolis, $1.625, to $26.75.

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