Huntington Bancshares is becoming a favorite pick among investors who are betting on the next bank merger target.

In the last two weeks, shares of the Columbus, Ohio-based regional gained 6%, while the Standard & Poor's bank index lost less than 1%. On June 4, Huntington's stock hit a 52-week high of $36.96875.

Talk about the company died down early last week because of much more insistent merger rumors about Hibernia Corp. of New Orleans. But last Thursday the talk picked up again after Thomas H. Hanley, a bank analyst at Warburg Dillon Read, listed Huntington among six banks on his takeover list.

The most likely acquirer of the bank would be Fifth Third Bancorp of Cincinnati, at a price of $53, Mr. Hanley told clients through his sales force.

Huntington, like most midsize banks, has always been the subject of merger rumors, but speculation dogs the company more than it has before.

"People mention Huntington as a takeover candidate because they have underperformed in the past," said Anthony J. Polini, bank analyst at Advest Group in New York. "In today's banking environment you have to earn the right to be independent in investors' eyes."

Indeed, recent mergers show that banks that misstep often find themselves merging with another bank not too long after.

But so far this year, Huntington has traveled a steady path to good financial performance.

In a statement to American Banker, Frank Wobst, Huntington's chairman and chief executive officer, said the company had "outlined a number of performance improvement initiatives in late 1998, and the company has begun to deliver on those initiatives as evidenced by strong first-quarter 1999 earnings and consistent improvements in efficiency."

Analysts agree that the company's performance has improved. But they also wonder if Huntington can maintain it. One of the strengths of the $28 billion-asset banking company is its sizable market share in higher-growth states such as Ohio, Michigan, and Florida.

But those markets are also dominated by formidable competitors such as KeyCorp and National City Corp., which have the largest market shares in Ohio, Chicago-based Bank One Corp. and Comerica Inc. in Michigan, and Bank of America Corp., which has the largest share of Florida's deposits.

"They are up against some stiff competition," said John E. Otis, a credit analyst at Bear, Stearns & Co. "They may not have the arsenal of products or market share to compete effectively or the currency to buy them."

In this merger environment, Huntington's efforts to improve its franchise might just make it more attractive to acquirers.

"They are a good franchise that is improving revenues and has a strong technology platform," said Frank J. Barkocy, a senior analyst at Keefe Managers in New York. "But the market is watching to see if they stumble."

Mr. Wobst is apparently aware of such pressures. At an analysts conference last month he said that if Huntington does not meet its 1999 estimates, it will "look at all options," Mr. Polini said.

In a statement, Mr. Wobst said the company does not comment on any merger speculation or activity.

"I believe their attitude is that they want to do it alone," said Mr. Polini. "But that may not be a realistic alternative."

Michael L. Granger, a bank analyst at Fox-Pitt, Kelton, said several companies might consider a deal. "Fifth Third has been fairly open about their interest in Huntington. Firstar would probably be interested in them as well. There is no shortage of interested players. Huntington is in good market."

Fifth Third and Firstar Corp. declined to comment.

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