Signet Banking Corp. stuck a pin in its rapidly inflating stock price Friday, announcing that the company is not for sale.

The stock gained more than 6% early in the day after a Business Week report that said First Union Corp. had offered approximately $35 per share, or $2.1 billion, for the Richmond, Va.-based bank.

In the first hour of trading Friday, volume had already hit the average for a full day.

Signet popped the bubble shortly after noon with a press release saying it has "not been and is currently not engaged in any merger discussions and will continue to pursue its current business plan."

After almost a week of buying the rumor, the market seemed to quickly sell the news; the stock dropped from a high of $29 to a low of $26.125 on the day.

But some bank analysts said there is still a possibility that Signet might be forced to seek a buyer.

"What they've said is that there is nothing brewing today," said Thomas Theurkauf Jr. of Keefe, Bruyette & Woods.

The unusual announcement seems to have tied Signet's hands, preventing it from engaging in immediate talks. "When the bank says something like that, it better be absolutely true," one investment banker said.

A skeptic noted, however, that about a month before Boatmen's Bancshares agreed to sell to NationsBank Corp., Boatmen's chief executive, Andrew Craig, said during an investor conference call that it intended to remain independent.

The run-up in Signet's stock reflected general interest in resurgent bank consolidation and the specific interest in the attractive Signet franchise.

"The attractive banking market in Virginia is a must for Wachovia Corp., First Union Corp., Suntrust Banks Inc., and Banc One Corp.," said an investment banker. "There are only two big ones left: Signet and Crestar Financial."

Signet has been the center of attention lately because the bank had a few problems.

The bank told analysts that its third-quarter earnings would be flat. Additionally, Signet was duped by two former Philip Morris executives who fraudulently obtained a $323.5 million dollar loan. The bank had to adjust 1995 earnings to reflect the damage.

"Things are going so well for so many people in the business that any little thing that could be a problem could attract attention," said Gerard Smith, the head of the financial institutions group at Union Bank of Switzerland.

But since the announcement the attention seems to have shifted back to fundamentals.

"The prospects for net interest and fee income are notably better than they have been," said Anthony R. Davis, a bank analyst at Dean Witter & Co. "We are continuing to recommend the stock."

Mr. Davis said the bank's information-based marketing makes Signet "well-positioned" in the industry. Very few banks have such systems in place, he said, adding, "I remain confident in the long-term potential of information-based management."

Analysts generally said the stock remains a win-win situation for investors.

If the earnings improve, the company is a good long-term investment. If they don't, the company could enter the market, whether management desires to remain independent.

"If they do sell," Mr. Theurkauf said, "there is a very nice premium to be had."

Several analysts said the bank has about a year to decide its fate.

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