A turnaround at First Bank System Inc. won a seal of approval from regulators last week. But considering its upward trend, the stock price is not due for a quick jump.

The Office of the Comptroller of the Currency freed First Bank System from a formal agreement requiring the lead bank to raise lending standards anc cut problem assets.

That action should clear the way for the stock price to start climbing back to $37 a share, an all-time high reached in 1987. "The stock should return to the 30s," said Robert Bissel, the senior vice president in charge of equity investments for Wells Fargo & Co. It closed Friday at $23.125 a share, up 12.5 cents.

Respectful Competitor

"We view First Bank System as one of the best franchises in banking," Mr. Bissell said. "They fell off the horse, but [CEO] Jack Grundhoffer put them back on."

Today, capital is up, nonperformers are down (below average), and net interest margins are 4.6%.

For most banks, an OCC formal agreement resembles an English maze made from groomed shrubbery: easy to enter but difficult to get out of. First Bank's quick exit, just 22 months after the OCC put the mandates in place, could be a record.

Official affirmation that the banking company is on the mend is not expected to spur a sharp run-up, however. Investors have been bidding the price up for months. Since September, the share price has gained $3.

Near Its High

The current price is slightly off the stock's 52-week high, making First Bank System one of a small number of banks that have found continued investor support in an increasingly bearish market.

"It was a psychological boost for us," said Richard Zona, the bank's chief financial officer. It was a boost also for Mr. Bissel, who started accumulating shares last year when they were trading for less than $20. And he is still buying.

"It is a great stock for the long haul," said Dennis Shea, an analyst with Morgan Stanley & Co.

Tax Benefits in the Wings

Trading at a modest 1.6 times book value, the stock looks downright cheap to some investors. The bargain gets even more enticing because '92 will bring tax benefits amounting to $2 a share.

First Bank got into trouble in the mid 19802 by trying to copy a wholesale banking strategy that Bankers Trust New York Corp. adopted successfully in the 1970s. But it backfired in 1988 when First Bank lost $400 million by miscalculating the direction of interest rates.

Regulators brought in Mr. Grundhoffer, recruited from Wells Fargo where he was senior executive officer for Southern California. Out went the efforts to copy Bankers Trust. In came a policy of retail banking, bolstered by sizable fee income, and cost cutting that has inmproved virtually every aspect of the bank's performance.

"he is orchestrating one of the best turnarounds I've ever seen," Mr. Shead said.

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