Indicating the success of its $262 million sale of common stock, First Chicago Corp's shares surged $1.375 on Friday.

Even at $34, the shares still trade below book value of $35.07 a share, making them one of the last real buys left after this year's bank stock rally, according to some investors.

First Chicago shares had the biggest gains on Friday. Overall, trading in bank stocks was mixed as the Dow Jones industrial average lost 1.04 points, to 3,398.69.

"I think the bank has addressed most of its nonperforming-asset problems." said David Dreman, chairman of Dreman Value Management, which owns a 2.15% stake in First Chicago. "It is a strong franchise and a stock that has been knocked down too far.

Expected to Beat $&P 500

Apparently, Mr. Dreman was not alone in his optimism. The global offering of eight million shares was priced Thursday night at $32.75 per share, 12.5 cents over the day's closing price.

From the share's low starting point, Mr. Dreman expects the stock to demonstrate above-average growth compared with the Standard & Poors' 500 index.

Mr. Dreman and other investors see the bank as on the mend. The bank has told analyst that it will focus on retail and middle-market business, considered growing markets.

Its credit business, the industry's third biggest, has a relatively low level of chargeoffs. The 5.54% Tier 1 capital ratio is higher than those at some other money-center banks. And new management appears dedicated to solving loan problems.

But even the warm reception. First Chicago's high level of bad loans and uneven earnings still keep other investors away.

"There's been a lack of consistency in earnings," said Thaddeus W. Paluszek, an analysis with Kidder, Peabody & Co. "The stock price reflects an uneasiness in the company's performance."

Net income fluctuated in 1991, from a high in the second quarter of $57.4 million to a fourth quarter loss of $15.1 million. The company earned $60.7 million in this year's first quarter.

"I don't think First Chicago is an awful company," said Harlan Sonderling, vice president at the Putnam Cos. in Boston, who favors several turnaround banks such as Bank of Boston Corp. "I just don't think its story in compelling. I see better choices elsewhere."

Workout Period

For starters, said Mr. Sonderling, the company has a long way to go to solve loan problems. And he doesn't want to be around while it works them out

In its prospectus for the stocks offering. First Chicago said it is considering using the proceeds to form a "bad bank," a separate institution to hold and sell both bad loans and nonstrategic assets. First Chicago has told analysts that the bad bank could dispose of as much as $3 billion in assets.

During a road show to market the offering, bank management gave analysts few details about the bad bank.

Some analysts said that if First Chicago goes ahead with a bad bank, they are unsure of the effects on capital. Also they said they are uncertain about the degree of writedowns that would be required in transferring loans to a new company.

First Chicago declined to specify what the proceeds from the stock offering would be used for, saying only that the company is considering the bad bank.

Without a definitive plan, analysts said the infusion of equity could hurt the bank's performance. For the first quarter, the bank reported an return on equity of 8%, well below the double-digit returns that many analysts look for. The added equity may in fact hurt the ratio, unless earnings are boosted accordingly, analysts said.

Fist Chicago's stock was sold in the United States, Canada, and overseas, a global strategy used by other big banks to sell large issues of stock to diverse investors.

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