Smith Barney. analyst Henry C. Dickson upgraded Firstar Corp. to "outperform," from "neutral," saying recent acquisitions give the Milwaukee-based banking company geographic diversity.

On Monday, Firstar said it had agreed to buy Investors Bank Corp., a $1 billion-asset thrift with a strong presence in Minneapolis-St. Paul, for $106 million.

Just last month, Firstar bought First Colonial Bankshares Corp. for $314 million, gaining a foothold in the highly competitive Chicago market.

"We view the combination of the two acquisitions as longterm positives for shareholders," Mr. Dickson said.

"The short-term impact seems to be reflected in Firstar's' stock price, which is down almost 10% since the announcement of the First Colonial acquisition."

As a result, he said, most of the negatives regarding the purchases are already reflected in the stock price. Mr. Dickson said the shares represent an opportunity to invest in a quality regional bank.

Upon completion of the mergers, he said, Firstar's asset mix will drop in Wisconsin (from 65% to 55%) and Iowa (from 19% to 15%), and rise in Illinois (to 19% from 7%) and Minnesota (to 13% from 9%).

The combined company, Mr. Dickson said, will be able to sustain a return on assets of more than 1.5% and a return on equity of more than 17.5%.

Fee income should continue to represent 35% of revenue, he said.

And except for a restructuring charge of 7 cents a share, no dilution is expected from the Investors acquisition. Mr. Dickson's 12-month price target for the bank is $38. In late trading Tuesday, its shares were at $32, up a quarter.

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