Shares of Chemical Banking Corp. fell Wednesday in heavy trading after being downgraded by Salomon Brothers Inc.

The stock was off 50 cents, to $31, in late trading, after plunging $1.75 the previous day. Volume was nearing two million shares, making it the second most actively traded issue on the New York Stock Exchange.

Analysts at Salomon, which cut the stock to a "hold" from a "buy," said they were concerned about credit quality costs at the New York bank "coming down more slowly than expected."

Forecasts Reduced

They also chopped their estimate of earning this year for Chemical by 10%, to $2.70 per share from $3. The 1993 estimate was sliced 10.5%, to $3.85 from $4.30.

Chemical has been a well-regarded bank this year after its merger with Manufacturers Hanover Corp. Its stock has performed better than other money-center institutions.

Only last week, analysts at Smith Barney, Harris Upham & Co. upgraded the stock to "buy" from "hold."

Some analysts grew more cautious following the bank's second-quarter results, which were announced in July. But those worries were about a slowdown in achieving projected cost savings from the merger, not about credit costs.

"I have spoken with management at Chemical several times recently, and I haven't gotten an indication of a new trend in credit costs," said George M. Salem, bank analyst at Prudential Securities Inc.

Chemical's managers told analysts in July that the company's provision for loan losses this year will likely be about $1.35 billion.

That has been expected to mean a lowering of the quarterly provisions by $20 million to $30 million during the second half of the year.

Nonperformers Seen Peaking

"We continue to believe that the third quarter will mark the peak in Chemical's rising non-performing assets," said analysts at First Boston Corp. in a report.

Lawrence W. Cohn of PaineWebber Inc. has maintained a neutral stand on the stock, saying it is only modestly undervalued. He also is concerned that the bank's provision for loan losses has not come down more.

For the second quarter, he had anticipated a decline to $325 million from $375 million in the first quarter. But the figure was $345 million.

Other bank stocks mounted a half-hearted bid to recoup losses of the previous day as the market in general tried to steady itself after several losing sessions.

Employment Report Fallout

Market technicians said trading was still being affected negatively by last week's unexpectedly disappointing employment report.

Only eight of the top 25 banks posted gains. Fourteen were down in late trading, and three were unchanged,

Wachovia Corp., Winston-Salem, N.C., was up 37.5 cents, $58.75. Other than Chemical, the biggest decliner was Core-States Financial Corp., Philadelphia, down 37.5 cents, to $47.375.

For the second day in a row, a big block of Chase Manhattan Corp. shares changed hands. The block was 456,000 shares, or 0.3% of outstanding shares. Chase shares were unchanged at $22. On Tuesday, a block of 4.4 million shares was sold. The sale was described as dividend related.

Among over-the-counter stocks, Crestar Financial Corp., Richmond, Va. was off 62.5 cents, to $25.75 on light volume.

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