J.P. Morgan & Co. shares rose 1.38% Wednesday, lifted by merger speculation in the wake of Credit Suisse's deal for Donaldson, Lufkin & Jenrette Inc. and an upgrade from an ING Barings analyst.

Barings lifted its rating for J.P. Morgan to "buy" from "hold" and set a 12-month-target price of $200 for the stock. That would be 16.8 times Barings' $11.90 estimate for 2001 per-share earnings at the New York banking company. Calling Morgan a "jewel of a franchise," analyst Andrew B. Collins wrote that the two recent takeover deals of U.S. brokerages by the Swiss banking giants "creates a race to establish who can created a dominant position in global investment banking."

Morgan, he wrote, "represents one of the premier remaining properties." Last month UBS AG announced a $10.8 billion deal to buy PaineWebber Inc.

Morgan's shares rose $2.0625 on Wednesday, to $151.0625, building on a 2.6% gain Tuesday, when talk of the deal emerged. The shares, which are a component of the Dow Jones industrial average, tend to move in tandem with it - but they gained despite a 1% decline in the index for the day.

Analysts said they consider the stock undervalued, considering that some of similar companies trade at about around 20 times their estimated 2000 earnings.

Mr. Collins said he doesn't expect J.P. Morgan to remain independent for more than a year. However, with a market capitalization of $24 billion and a potential price of $31.8 billion (based on Mr. Collins target price), Morgan would be a huge target for any acquirer. A deal might have to involve a merger of equals or one of the big international players.

Given Morgan's clout in the European merger and acquisition market - a report by Diane Glossman at UBS Warburg notes that $1.36 billion of Morgan's income in 1999 came from Europe, compared to $1.082 billion in North America - some say a European takeover is likely.

Deutsche Bank AG in particular could be interested in strengthening its home and foreign bases in one purchase. Its Frankfurt neighbor Dresdner Bank AG might also consider the step, but comes from a weaker position, Mr. Collins said. He named HSBC, of London, as another potential buyer.

Steven Eisman of CIBC World Markets, who has a "strong buy" on J.P. Morgan, agreed that a European buyer is as much a possibility as a U.S. one. "I would never have thought that DLJ is for sale," he said. "Now everything is possible."

Ronald I. Mandle of Sandford C. Bernstein & Co. said, however, that Chase Manhattan Corp. is the best fit, with Chase's huge customer base providing an outlet for Morgan's products. Chase has the cash to be an acquirer, Mr. Collins said, but might not see enough opportunity for cost saving.

Also mentioned as a possible acquirer was Citigroup Inc. And Mr. Collins said the U.S. brokers Merrill Lynch and Goldman Sachs Group might aim to strengthen themselves in mergers of equals with Morgan.

Elsewhere in the market, Commercial Federal Corp. was up 4.44%, to $17.625, after the Omaha thrift company rejected a takeover offer by two investors for a reported $1.3 billion in cash and stock.

Overall, banking stocks resumed their rally of late last week and early this week, making up for Tuesdays losses.

American Banker's index of the top 50 banks closed up 0.81% on Wednesday; its index of 225 banks rose 0.82%.

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