Chemical Banking Corp. said it will buy back up to 10 million shares, or 4% of its common stock, during the next 12 months.

The New York-based company expects to avoid issuing new stock through the repurchase program. Chemical has earmarked $350 million to $370 million for the buyback, which bank officials said would be used for various purposes, including financing of an employee benefit program.

A Wall Street analyst who asked not to be identified said Chemical was being "opportunistic" in buying the shares now. Some analysts say that Chemical's shares, which trade at around $37, are undervalued.

Offering Reasurance on Stock Dilution

With the repurchase program, "we're saying to shareholders there is no reason to expect stock dilution," said Dina Dublon, managing director, corporate finance. "We are profitable, and we are retaining earings at a very fast pace."

Chemical also said it would redeem on July 15 all its adjustable-rate, series C preferred shares at $12.36 each, plus accrued but unpaid dividens from July 1 through July 15.

The company said it plans to use $600 million in cash and proceeds from a new, $200 million isssue of adjustable-rate, cu- mulative preferrred stock to fund the buyback and the series C preferred stock redemption.

Chemical has 254 million common shares and 34 million series C preferred shares outstanding.

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