SAN FRANCISCO - Union Bank, controlled by Bank of Tokyo, has been almost universally viewed as a bank that can't be bought.

Bank of Tokyo, which is merging with Mitsubishi Bank Ltd. to create the world's largest bank, is widely assumed to be too enamored of a big California presence ever to sell $17.2 billion-asset Union.

But this month James M. Marks, an analyst with Hancock Institutional Equity Services in San Francisco, issued a report questioning that assumption.

Union Bank, he said, is such an attractive acquisition target that merger prospects should be taken into account when looking at its publicly traded stock.

San Francisco-based Union is a "premier entry vehicle into the state for an out-of-state bank," Mr. Marks said.

Union Bank won't comment on the possibility of a takeover, said investor relations manager John A. Rice Jr. He added that the company has said nothing that could "lead to this hypothesis."

But Mr. Marks said there is considerable reason to think the current ownership could change. Bank of Tokyo owns 72% of Union stock, 22% is traded, and Meiji Mutual Life Insurance Co. of Tokyo owns the rest.

In May, Union Bank announced plans to merge next April with Bank of California, a $7.7 billion-asset subsidiary of Mitsubishi Bank. The banks said then that they expected the public shareholders of Union Bank to continue as shareholders of the merged bank, which is to be called Union Bank of California.

Mr. Rice said this view has not changed.

But Mr. Marks noted that the combined Union Bank and Bank of California would be extraordinarily attractive to any bank wishing to grow in California, especially one with national ambitions.

With $26 billion of assets, the bank will be about the same size as First Interstate Bank of California, which ranked No. 3 in the state at yearend, with $25.2 billion. In deposit market share, it will be "virtually tied" with the First Interstate Bancorp unit, Mr. Marks said.

As a result, Mr. Marks said, he would rate the post-merger Union Bank of California, along with Chatsworth, Calif.-based Great Western Financial Corp., the $40 billion-asset thrift holding company, as the most attractive big-bank acquisition targets in California.

In a takeover, Mr. Marks, said Union Bank of California could fetch $70 to $80 per share. As of Friday afternoon, the price was $51.50 on the Nasdaq market, up 37.5 cents on the day and nearly double the low for the last year of $26.75.

Even without a takeover, Mr. Marks said, Union Bank is a good investment.

The market, he said, isn't giving enough credit to the upside potential of the planned merger, which he believes will boost 1996 earnings by 7%, assuming a 15% reduction in Bank of California's expenses, net of revenue losses.

The banks have not publicly estimated how the merger will affect their earnings, and Mr. Rice said he could not comment on Mr. Marks' estimates.

Mr. Marks acknowledged that Bank of Tokyo might not agree to sell Union Bank of California, since the Japanese company appears to want to keep its presence in California. If the yen remained high, the economics might not be very compelling, he noted.

But if an offer were to come, the post-merger Union Bank, as a publically traded company, could be forced to respond. Even if it chose not to sell, it could be forced to buy back its shares at a premium to fulfill its legal obligations to serve the best interests of shareholders.

But Mr. Marks' opinions seem at odds with those of other analysts. Several analysts said they believed his talk of takeover premiums for Union is off the mark.

"I don't attribute much takeover premium," said Joseph K. Morford, a stock analyst with Alex. Brown & Sons in San Francisco.

Mr. Morford said he believes the bank's Japanese parents are "comfortable" with their current ownership stake and intend to maintain it. Sally Pope Davis, a stock analyst in New York with Goldman Sachs & Co., said she shared that sentiment.

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