As the two biggest banking companies in New England prepare to merge, banks in their shadow are sizing up their options.

Fleet Financial Group's $16 billion acquisition of BankBoston Corp. would create a $130 billion-asset giant and leave the region with just six banks in the next tier, with assets between $4 billion and $18 billion.

Analysts said most of these companies are too small to attract huge acquirers interested in entering the Northeast. But with big rivals getting bigger, mergers among these midsize banks are increasingly likely.

For now, most of these banks will be looking at the $12 billion of deposits that the new Fleet Boston Corp. would have to sell in Massachusetts, Rhode Island, and Connecticut to win government approval.

"We see a big pile of ice cream out there, and we are all grabbing our spoons," said William H. Chadwick, president and chief executive officer of the $4.4 billion-asset Banknorth Group Inc. in Burlington, Vt.

"Fleet is in essence selling the No. 2 market share," said Anthony J. Polini, analyst with Advest Group Inc. in New York. "Someone could win big."

Many of the local banks have feasted on previous Fleet or BankBoston deals, including Banknorth, Webster Financial Corp. of Waterbury, Conn., and UST Corp. of Boston.

But the locals may have to bid against larger companies. Analysts expect First Union Corp. of Charlotte, N.C., and Cleveland-based KeyCorp to bid. The $80 billion-asset KeyCorp owns the second-largest share of deposits in Maine, sixth-largest in Vermont, and 29th-largest in New Hampshire, according to the Federal Deposit Insurance Corp.

First Union and Key spokesmen refused to comment.

Though Fleet Boston is expected to propose selling the deposits in small batches, government antitrust lawyers could require larger lots to foster more viable competition.

"The pattern for Fleet is that they prefer to keep the divestitures out of the hands of their largest competitors," said Kevin T. Timmons, analyst with First Albany (N.Y.) Corp. "I would assume that is what they will do again."

"Rather than selling out to one entity and creating a strong competitor, it makes sense for them to sell branches in more of a piecemeal fashion," observed Frank J. Barkocy, managing director of Josephthal, Lyon & Ross Inc., New York.

That's what midsize banks are counting on. Fleet is proposing to sell $7 billion to $8 billion of deposits in Massachusetts, mostly in the Boston area, as well as $2.5 billion in Rhode Island and $1.5 billion in Connecticut.

UST would like to bid on the Boston-area branches, said president and CEO Neal F. Finnegan. The $6 billion-asset UST has 89 branches in greater Boston.

Peoples Heritage Financial Group in Portland, Maine, wants to +boost its presence in central Massachusetts. The $12 billion-asset company holds the top market share in its home state and in New Hampshire and is currently eighth in the Bay State.

"We are not ruling anything out, but central Massachusetts is our top priority," said Brian Arsenault, a vice president at the company.

A potential acquirer of the Connecticut deposits, People's Bank in Bridgeport, passed the last time Fleet was selling branches there. That was in 1995, when Fleet was buying Shawmut National Corp. of Hartford and People's was busy building in-store branches.

This time, "we will take a hard look at what there is to bid on," said George W. Morriss, chief financial officer of the $9.9 billion-asset thrift.

Executives at $9.9 billion-asset Webster Financial said they are interested in Fleet Boston's Connecticut operations and probably the Rhode Island deposits. Mr. Chadwick said Banknorth will eye Connecticut and Massachusetts deposits.

The last of the six mid-tier competitors, Citizens Financial Group of Providence, R.I., is the only one in the group not independently owned. The region's second-largest bank, Citizens is owned by Royal Bank of Scotland.

Sir George Mathewson, CEO of Royal Bank, issued a statement Monday after the Fleet-BankBoston announcement saying the company is interested in everything that will be on the selling block, especially deposits outside Rhode Island.

Analysts do not expect most of these institutions to become more attractive takeover targets just because Fleet and BankBoston are no longer available.

"A national bank would need several $10 billion companies to put together a meaningful franchise to compete in New England," said John S. Carusone, president of Bank Analysis Center in Hartford, Conn.

In fact, the remaining companies "are becoming increasingly unbuyable," said Jon D. Holtaway, senior vice president at investment banking firm Danielson & Associates Inc. in Rockville, Md. Some "are not sitting in markets where the big banks want to be," and others, such as thrifts, "do not have the portfolio that will attract big banks."

That said, if UST succeeds in buying Boston branches, "it would make them a target of all the big banks," Mr. Holtaway said.

Webster Financial, with a strong branch network throughout Connecticut, is another possible exception. "Webster is a legitimate target anyway, without this merger and without winning divestitures," Mr. Polini said.

Over the longer term, these midsize companies could follow Fleet Boston's lead and merge, analysts said. Such deals could create "a regional franchise that is a real competitive alternative, and one that could grow to be of enormous takeover value," Mr. Carusone said.

But he added that he doubts any of these companies will talk to each other right away.

"For now, I think everyone will go back to the drawing board and evaluate their strategic plan," he said. "I think everyone wants to wait and see how this whole thing plays out."

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