Short-selling in shares of First Bank System Inc. jumped 64.8% in the month ended May 15, while it fell at most other banks.

Wall Street observers said the increase may be related to the Minneapolis banking company's own share repurchase activity or to speculation that First Bank will unveil an acquisition soon.

Bank officials declined to comment.

First Bank's short interest position, the total number of shares shorted, rose by 2.6 million shares, to 6.6 million, according to data from the New York Stock Exchange.

It was the largest increase in shares sold short of any bank traded on the New York or American Stock exchanges.

In fact, total short interest fell 5.3% from mid-April to mid-May for banks listed on those exchanges.

"They have a higher valuation stock and there is speculation that they're going to be the next acquirer," said Nancy A. Bush, regional banking analyst at Brown Brothers, Harriman & Co., New York.

Takeover announcements often cause shares of acquirers to fall and those of the acquirees to rise, creating profitable opportunities for both short- sellers and arbitragers.

Ms. Bush, however, doubts that a deal by First Bank is imminent. The analyst also said the fundamental outlook for the company remains strong. A fall in earnings prospects is the usual impulse for short activity, which involves selling borrowed shares on the prospect that they will decline in value.

Instead, Ms. Bush and other industry watchers suggested that the short interest rise could involve the bank's large share repurchase program.

Several banks that have undertaken big share repurchases lately have hired investment banks to short the stock and then sell the shares to the bank.

By doing so, the bank can immediately retire the shares, gain a quick boost in earnings per shares, and reduce capital ratios.

Traditionally, capital buybacks take place over an extended period - often one to two years.

First Bank, which bought back 24.4 million common shares between 1993 and 1995, has said it plans to buy back 25 million more common shares through 1997, or 17% of its $8.8 billion market capitalization.

The bank will not say if it has hired an investment banker to short its stock, but market sources have recently said First Bank was exploring the possibility.

Banks that have used this buyback method - known as block share repurchases - include Banc One Corp., AmSouth Corp., and Southern National Corp.

Elsewhere, analyst John Mason of Interstate Johnson Lane lowered his investment rating on Regionals Financial Corp. to "neutral" from "buy" because, he said, it is fairly valued at its current price level. The stock was unchanged Wednesday afternoon at $46.87 per share.

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