Most bank stocks regained ground Thursday with the help of reassuring words from Wall Street.

Citicorp, which led a broad selloff on Wednesday, also was the front-runner in Thursday's rally.

Shares of the nation's largest bank rose 62.5 cents, to $17.375, after falling $1.125 the day before. For the second straight day, Citicorp was the most active issue on the New York Stock Exchange, with about four million shares changing hands.

Vote of Confidence

Merrill Lynch & Co.'s Judah S. Kraushaar on Thursday elevated the stock to a "buy" from a "hold," citing its decline in recent days and signs of a turnaround in the company itself.

The move was surprising, given Citicorp's recent downward revision of second-quarter earnings and the revelation that it is operating under a memorandum of understanding with regulators.

In addition, Lehman Brothers' James M. Rosenberg reiterated his buy recommendation for Citicorp and several other bank stocks.

Saying Wednesday's selloff was "overdone," Mr. Rosenberg also reiterated buys on Chemical Bank Corp., First Chicago Corp., BankAmerica Corp., J.P. Morgan & Co., and Bankers Trust New York Corp.

He also reaffirmed "outperform" ratings on Chase Manhattan Corp., Bank of New York Co., Republic New York Corp., and Wells Fargo & Co.

Jitters Persist

But investor nervousness was still apparent. After opening higher, banks fell back in late morning before reversing direction to post net gains on the day during the afternoon.

Besides Citicorp, other gainers included BankAmerica, up 37.5 cents to $43.625; Chase Manhattan Corp., up $1.25 to $23.875; Chemical, up 87.5 cents to $33.625; and Morgan, up 62.5 cents to $60.125. Chase, Chemical, and BankAmerica also placed among the 10 most active Big Board stocks.

The Dow Jones industrial average lost 2.17 points, to 3,304.89.

Some Lost Ground

Banks with heavy fee-based operations also advanced because they are regarded as insulated from wide swings in earnings. Fifth Third Bancorp, Cincinnati, was up $1.50 to $52.75, and Northern Trust Corp., Chicago, rose $1 to $58.50.

But not all large banks were gainers. NationsBank Corp. was down 87.5 cents to $45, Fleet Financial Group Inc. was off $1 to $26.50, and First Chicago was down 62.5 cents to $33.50.

Among over-the-counter stocks hit hard on Wednesday, CoreStates Financial Corp. fell another 37.5 cents to $49.75. The bank dropped $1.125 the day before. But U.S. Bancorp, Portland, Ore., was up 25 cents to $22.625.

"There has been a definite change in psychology," said Mark Alpert of Bear, Stearns & Co. "A few months ago, an event like Olympia & York going to the bankruptcy court caused barely a ripple for the banks. Now a major selloff can be triggered merely by rumors."

"Wednesday's market felt like the fall of 1990 all over again," said Lawrence R. Vitale of Kemper Securities, Chicago, referring to the darkest depths of the bear market for banks, when the stocks seemingly fell lower without any news.

Sales by Fidelity Rumored

Wednesday's plunge was fueled by market whispers that Fidelity Management and Researh Co., the nation's largest mutual fund operator, was selling bank stocks and that debt restructuring talks with Brazil were poised to collapse.

The rumored selling was denied by Fidelity, and Citicorp announced Thursday it had been assured that the government of Brazil wants to finish a debt restructuring package "as quickly as possible," with details hammered out over the next two weeks.

Mr. Alpert attributed the jittery toe of the bank stock market to the continuing uncertainty about an economic recovery after a long rally in bank equities. "The economy is not as far along as had been hoped, and meanwhile, the banks have run a lot," he said.

More Selectivity Expected

Mr. Alpert expects to see far more selectivity in bank stock performance during the rest of the year, as does Mr. Vitale.

"The gains today have not been across the board, although the losses on Wednesday certainly were," said Mr. Vitale. He noted that while a number of large banks posted gains Thursday, the mostly smaller banks traded over the counter were not recovering at nearly the same pace.

The Chicago analyst said he felt the market for bank stocks has softened lately, despite good earnings this year, because the industry "has not done a good job of showing that it can achieve these kinds of results consistently."

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