Depressed stock prices have spurred talk that general finance companies are vulnerable to takeover, but analysts said the companies are likely to put up a strong fight to stay independent.

Like bank stocks, those of general finance companies have lost much of their value in recent months, with most of the American Banker's index of 15 finance companies trading close to their 52-week lows. Since a high of 517 last year, the index has fallen 34%, closing Friday at 341.7.

That has created plenty of buzz about some of the large banks and insurance companies swooping in and snatching up subprime specialists such as Associates First Capital and Household International. A report Friday by PricewaterhouseCoopers LLP concludes that the number of U.S.-headquartered financial service institutions could shrink by 75% in the next decade.

If buyers want to scoop up financial companies anytime soon, "they will have to pay a huge premium" to current share prices, said Robert P. Napoli, an analyst with ABN Amro in New York. "It will be hard for them to get bought."

As big banks and insurers look to expand their services in the next step of financial modernization, finance companies - many with subprime specialties - appear to be an attractive niche opportunity for acquirers.

Citigroup, whose strong share price put it at the top of prognosticators' lists of potential buyers, might look to expand its distribution network by buying a company such as Associates or Household.

Wells Fargo & Co., with its large home equity component remaining from the former Norwest Corp., has also been mentioned as a possible buyer. AIG, one of the few insurance companies with a relatively high price-to-earnings ratio, also has been mentioned. Foreign banks also are possible buyers of finance companies.

Shares of Associates, an Irving, Tex.-based commercial and consumer finance company, are cheap, having taken a beating because of an earnings-shortfall warning the company issued to Wall Street in January.

Analysts are also doubtful about the firm's ability to generate enough revenues from Japan in 2001 to meet estimates. Japan is lowering interest rate caps this June, and this could put pressure on the company's profit margin there. Japanese business accounts for 25% of Associates' profits.

"That is the biggest question," said Gary Gordon, an analyst with PaineWebber Inc. in New York. "Japan under any circumstances delivers a very attractive return, but you are going to have a year that it will be very difficult to grow earnings because of the rate ceilings."

Also putting pressure on Associates will be the status of delinquencies and chargeoffs. To survive as an independent, Associates must get better results, said Steven Eisman, an analyst at CIBC World Markets in New York.

"If they don't show improvement in home equity quality, they won't see any appreciation in the stock," Mr. Eisman said. "In fact, you would see a decline, forcing [Associates] to sell."

The low price of Associates' stock - about $20, which is close to its 52-week low of $17 - has helped to generate rumors that a banking giant such as Citigroup or Wells Fargo could step in and get a good price. But the finance companies could well resist a sale, said Katrina Blecher, an analyst at Brown Brothers Harriman in New York.

"Management at Associates can do the best job by staying independent, because they have proven in different economic environments they can to grow earnings," Ms. Blecher said.

Companies such as Associates and Household are not a particularly good match for financial conglomerates such as Citigroup, Ms. Blecher added.

Citigroup, looking to reap benefits from cross-selling products such as investment accounts and insurance, would not find much gold with the subprime clientele. Also making subprime lending less palatable for Citigroup is the possibility of a shift in capital requirements to a risk-based model - as suggested by the Federal Deposit Insurance Corp. - under which banking companies would be required to set aside more capital for subprime loans.

Management is unlikely to accept less than a 50% premium to its share price, Mr. Napoli said, so a deal might not be as attractive as it looks.

Household, which has met Wall Street earnings targets, would not come cheap, said Reilly Tierney, an analyst with Fox-Pitt Kelton, who also thinks acquisition of Household or Associates is out of reach despite down days for earnings multiples.

"Associates wants a chance to turn it around," Mr. Tierney said. Selling for "maybe $30 would be a signal to the market they were radically overpriced."

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