Speculation about large bank deals has been quiet for the last month and a half, but rumors about Chase Manhattan Corp. acquiring Merrill Lynch & Co. still swirl through many trading rooms.

In fact, rumblings about a possible Chase-Merrill combination have been heard, on and off, for several years. It is one of the industry's most persistent rumors, always seeming to re-emerge after being laid aside or quashed.

The latest revival is under way as investors pine for a big bank deal, said Scott Edgar, director of research at Sife Trust Fund in Walnut Creek, Calif. If Chase and Merrill were to merge, he said, "it would give consolidation a good kick in the pants, and give bank stocks a good boost."

Sizable mergers in the financial sector have been rare this year, partly because of the poor performance of bank stocks, but also because the biggest and most aggressive acquirers are still digesting their purchases of last year. Also, the market has been much more skeptical about bank deals and signaled this by selling acquirers' shares.

But the market indicates it would look favorably upon a potential deal between Chase and Merrill, said Sean J. Ryan, a bank analyst at Bear, Stearns & Co. He said investors trust Chase because "they have for the most part done everything that they said they would do, and the company is viewed as very prudent.''

From last Wednesday, Aug. 12, to Wednesday, Aug. 17, shares of Merrill Lynch, the nation's largest brokerage, have surged 6.8%, while shares of the Standard & Poor's bank index have gained 6.5%. It is the third time this year that speculation about the two companies has caused Merrill's stock to rise.

The surge was fueled by a report in The Wall Street Journal that Merrill Lynch could once again be open to the merger discussion after the abrupt departure on July 28 of Merrill president Herbert Allison, who was against merging with Chase. But skepticism about such a deal is nearly as heavy as the speculation.

"Banks and brokerages do not have an encouraging history together,'' said Mr. Ryan of Bear Stearns. "To say that Citigroup is an unambiguous success after just a year and a half is a bit premature.'' Citigroup is the combination of Travelers Group and Citicorp.

"The market may be trying to read too much into this, because big bank deals have slowed in the past month,'' said Sanjiv Sobti, an investment banker at J.P. Morgan & Co.

"Enough with this rumor already," said Steven Eisman, a bank analyst of CIBC Oppenheimer. "I just don't see Merrill selling to Chase.''

Merrill and Chase both declined to comment on the merger speculation.

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