First Union Corp.'s shares flirted with their 52-week low Thursday as speculation circulated that the Charlotte, N.C., banking company might take a billion-dollar writedown in the second quarter.

Concerns about First Union's credit quality and the costs of its restructuring have been pressuring its stock ever since the company pulled out of a Sanford C. Bernstein & Co. conference two weeks ago. Rumors blazed anew Thursday after PaineWebber Inc. issued a report predicting the huge writedown.

Analyst Ruchi Madan predicted First Union would take the dramatic step to improve its long-term flexibility and profitability.

The charge would probably include $150 million to $500 million related to underperforming businesses, she said, such as credit cards, residential mortgages, and the Money Store. The company would also boost its loan-loss reserve by $200 million to $300 million and would probably take a restructuring charge of $150 million to $200 million, she said.

Though the shares fell as low as $27.75, they recovered late in the day to close at $28.75, up 1.32% for the day. First Union's stock hit a 52-week low of $27.3125 last Friday.

Savings from the moves could total $180 million annually beginning in 2001, Ms. Madan said.

Concerns about credit quality took off last week after Wachovia Corp. of Winston Salem, N.C., a company known for its stellar credit quality, warned that it would not make analysts earnings estimates because of problem loans. Unionbancal and Pacific Century followed with similar warnings.

Ms. Madan's report about First Union reinforced concern that investors already had about credit quality, traders said. By midday, some traders were worrying that that the writedown could be as much as $3 billion.

The PaineWebber analyst said she has no doubt that a writedown of some sort is in the making, given the company's statements that it is in the middle of a strategic review of its businesses.

She also dismissed the idea that First Union would keep the Money Store - the source of many of its problems - saying it is not fully integrated into the rest of the company. A sale now "will not get the greatest price because there are other properties like it that are on the market," she said.

Virginia Mackin, the director of communication at First Union, would not comment on the market rumors or Ms. Madan's note. "We expect to make an announcement on or before our earnings release, which would be in the third week of July," she said. "Frankly, any information regarding rumors would certainly be inappropriate at this time.''

Balance sheet pressure, which has been an issue for many banks, is especially great for First Union. Ms. Madan said, noting an 8% rise in wholesale funding and $11 billion of long-term debt that is expected to mature in 2000 and be rolled over at higher rates.

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