Summit Bancorp, one of 1997's hottest bank stocks, cooled a bit on Wednesday after a downgrade by a major admirer.

Earnings "are not going to be as strong as I was looking for," especially in the near term, said Lehman Brothers analyst Michael A. Plodwick.

Shares of the $23.8 billion-asset New Jersey banking company fell 12.5 cents, to $51.0625, after Mr. Plodwick's downgrade to "outperform" from "buy." He reduced earnings estimates by 5 cents, for both 1998 and 1999.

Mr. Plodwick's move was one of several downgrades for banks Wednesday, as analysts evaluated recent run-ups in share prices. Broadly, markets seesawed before ending the day with modest gains, which pushed indexes to record levels. The Dow Jones industrial average gained 25.41, to close at 8775.40, another all-time high.

Summit's "major strategic issue" is that its fee income is relatively low as a percentage of total revenue, Mr. Plodwick said.

About 20% of the Princeton-based bank's revenue comes from fees and the balance from interest income. Many other banks are aiming for an even split between the two sources. As a result, Summit is more vulnerable to either margin pressure or a slowdown in loan demand, Mr. Plodwick said.

The analyst is also concerned about Summit's net interest margin, which he expects to drop 1 or 2 basis points in the first quarter. He had predicted the margin would increase to 4.30% from 4.21% as Summit absorbed its third-quarter acquisition of Collective Federal Savings Bank.

Summit "has not repriced deposits as aggressively as originally intended" because of concerns over runoff that could hamper loan growth, Mr. Plodwick said.

Still, "most other operating trends remain strong," including loan demand, which is growing at a 5% to 6% annualized rate, he said.

The bank also has "the best franchise available in the Northeast," Mr. Plodwick said, making it a good candidate to be acquired.

Separately, National City Corp. rose $1.375, to $71.3125; Norwest Corp. fell 25 cents, to $43.0625; and SunTrust Banks climbed 18.75 cents, to $76.1875, after downgrades to "hold" from "buy" by Frank J. Barkocy at Josephthal & Co.

The shares have hit or passed pricing targets, Mr. Barkocy said. He sees more upside potential-and reiterated "buy" recommendations-for First Union Corp., down 12.5 cents, to $56.3125; Fleet Financial Group, up $1.375, to $82.75; KeyCorp up 18.75 cents, to $37.625; PNC Bancorp, down 6.25 cents, to $59.875; and U.S. Bancorp, up $1.875, to $122.625.

For the day, the Standard & Poor's bank index rose 0.73% and the Dow Jones industrial average 0.29%. The Nasdaq bank index climbed 0.64% and the S&P 500 0.47%.

J.P. Morgan & Co. fell $2.25, to $133, after the comptroller of the currency reported on the extent of commercial banks' derivative activities in emerging markets like Asia.

Fourth-quarter derivatives trading revenue was off 52% from the third quarter, the comptroller said. Market watchers are concerned that the decline will extend well into this year.

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