Fleet Financial Group's shares were downgraded Monday on concerns that without the benefit of merger-related cost cutting the company's earnings growth rate would lag behind other banks'.

Fleet's earnings have little room to grow, because "cost savings from the mergers have played out," said J.P. Morgan Securities analyst Catherine Murray, who cut Fleet to "market perform" from a "buy" rating.

The analyst's move was also valuation-related. "Fleet just bumped up against our price target" of $66, Ms. Murray said.

On June 27, Fleet announced it had completed its conversions of Shawmut National Corp. and the American affiliate of National Westminster Bank. With those deals, both an-nounced in 1995, Fleet's assets grew from $47 billion to $85.6 billion today.

The bank reported cutting $600 million in operating costs in absorbing Shawmut and Natwest.

'The cost reductions pleased Wall Street and helped drive up Fleet's stock price this year by 32.3%, putting it well ahead of the Standard & Poor's bank index, which is up 25.3%.

But a number of banks, particularly some that have been active acquirers of other banks, have found it is much easier to reduce expenses than boost revenues.

Ms. Murray said Fleet may now be caught up in the same syndrome.

"Fleet is likely to post lower than average earnings per share growth in 1998 ... and in our opinion has more uncertainty regarding medium-term EPS growth prospects than the average bank," wrote Ms. Murray in a report to investors.

She predicted Fleet's earnings would grow 9% in 1998. Double-digit growth is likely elsewhere in the industry

Fleet's stock has also been helped by speculation that the company might be bought by First Union Corp. or Chase Manhattan Corp.

But Ms. Murray said a "sale of Fleet would be difficult to predict," particularly because the bank is still adjusting to its new size by shedding unwanted components.

Natwest Securities analyst Thomas M. McCandless, who is more optimistic about Fleet's prospects, said its recent sales of its indirect auto lending, corporate trust, and subprime mortgage operations will benefit its share price in the second half. A more aggressive stock buyback program would help, too.

But he also noted that Fleet has had troubles with key staff departures in its mortgage headquarters in South Carolina and has encountered public relations problems in its New England base.

Fleet shares dropped $1.375 Monday, to $64.625.

Shares of BankAmerica Corp., which have seen a phenomenal run-up lately, were also downgraded yesterday. Morgan Stanley, Dean Witter, Discover & Co. analyst Arthur Soter downgraded the stock to "outperform" from "strong buy."

Mr. Soter was not available for comment.

Bank America shares fell $1.19, to $67.75.

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