Fleet Financial Group shares, boosted by merger speculation for much of the year, came back to earth Tuesday as talks with a potential partner were said to have broken off.

Shares of the Boston banking company dropped $1.50, to $83.375, as word circulated that PNC Bank Corp. had shelved merger discussions with Fleet over operational issues. Fleet was down nearly $3 early in the day, and PNC shares closed at $59.50, up 43.75 cents.

The activity came as many bank stocks gained for a second straight day. BankAmerica Corp. was up $3.25, to $85; Mellon Bank Corp. $1.75, to $73.25; and NationsBank Corp. $3.25, to $76.8125.

The Standard & Poor's bank index was increased 1.47%, and the Dow Jones industrial average gained 0.77%. The Nasdaq bank index rose 0.92% and the S&P 500 was up 0.83%.

PNC, in reevaluating its current strengths, is not feeling as pressured to push through a merger, executives familiar with the situation said.

PNC management "expressed that the company has a platform where it doesn't have to join forces with someone right now to be secure," said Gerard Cassidy, a banking analyst with Tucker Anthony.

That platform includes national reach through mortgage lending and a broad marketing affiliation with the Automobile Club of America, Mr. Cassidy said.

Talks "didn't make it to that next level" where executives hash out who would run the combined operation and where it would be based, Mr. Cassidy said.

Still, he and others said that discussions could resume, given growing pressures on banks to find partners or perhaps face a forced deal.

A Fleet accord with PNC would probably be done on an amiable basis, analysts said.

Indeed, the companies' chairmen, Terrence Murray at Fleet and Thomas O'Brien at PNC, are friends, which should help in discussions and ease management transition issues that scuttle other deals.

Both Fleet and PNC declined to comment. But investors seem convinced that a deal could be in the wind for the New England regional company. Fleet shares have remained high this year, while other bank stocks have waxed and waned on every rumor. PNC and First Union Corp. are most often mentioned as partners for Fleet.

"Clearly, the question the market has been asking is whether Terry Murray is a buyer, a seller, or a partner in a merger of equals," said David Hilder, a banking analyst at Morgan Stanley Dean Witter.

By combining, the banking companies "would have a lock on the Northeast," Mr. Cassidy said.

That status would be attractive to a BankAmerica or Norwest Corp. that wanted to be in that region, analysts said.

Merger or not, Mr. Hilder continues to think highly of Fleet. Shares are "inexpensive based on cash earnings and opportunities to generate income from recent acquisitions," he said. "The big wild card-Fleet's future size."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.