FleetBoston Financial Corp., whose strong regional lending business stands to profit from further interest rate cuts, was nonetheless downgraded Tuesday by an analyst at Sandler O'Neill.

Citing concern over the banking company's exposure to the capital markets, Mark Fitzgibbon reduced his rating on FleetBoston from "buy" to "outperform." In the past month, FleetBoston shares have traded up 20% and are currently trading within 10% of Sandler O'Neill's price target of $44. The pricing, Mr. Fitzgibbon said, indicated it was time to downgrade.

Mr. Fitzgibbon said that his downgrading may prove temporary and that FleetBoston, with its solid regional lending business, could benefit from any further rate cuts by the Federal Reserve. These benefits should pay some dues with investors during the second quarter, he said.

"In the short term," he said, "there's no impact on the bottom line."

Fleet's Quick & Reilly brokerage unit and its investment bank, Robertson Stephens, tie the Boston banking company tightly to the capital markets and their volatility, Mr. Fitzgibbon said.

"They do have a diversified balance sheet, but if capital markets are soft, that will generally affect their revenue stream," he said.

But not everyone is so cautious on FleetBoston.

At an American Banker analyst roundtable discussion on Tuesday, Michael A. Plodwick of UBS Warburg, who maintains a "strong buy" on the banking company, expressed doubt about the degree to which the company's performance is determined by the capital markets.

"Robbie Stephen peaked out in the first quarter of the year, and Fleet still had two good subsequent quarters. So it's not totally dependent on that," Mr. Plodwick said.

Factors like the volatility in the Nasdaq and FleetBoston's recent purchase of Summit Bancorp have already been taken into account, he said. "We think all those things have been more than reflected in the stock price," Mr. Plodwick said.

Others agreed.

Christopher M. Mutascio of Legg Mason Wood Walker Inc., who also maintains a "strong buy" on the stock, said that the stock is already trading at a discount and that Fleet's continued high asset quality makes it a solid buy. "I will take that capital markets risk knowing Fleet has managed their asset quality risk," Mr. Mustacio said.

"They've been proactive and positioned themselves on the reserve side in case of a credit downturn. They've charged off loans that might go bad, bolstering an already strong credit culture, and they can pay for it from the gains they made earlier when capital markets were strong," he said.

Mr. Fitzgibbon predicts that FleetBoston's stock should trade at 11.1 times earnings this year, slightly off last year's estimates. But Mr. Mutascio said he would not be surprised to see Fleet stocks trade at 13 or 14 times earnings if a bank rally continues. "We're going to bet on interest rates easing, and that means a quality franchise like Fleet will get the multiple revision upward. And with lower interest rates, you could see a resurgence in capital markets," he said.

On Tuesday, Fleet was one of a handful of names trading up. The company was up 68.75 cents, or 1.69%, to $41.375 in the afternoon.

The American Banker index of top 50 banks was down 1.66%, and the index of 225 banks also fell 1.66%.

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