Short interest in Bank of New York Co. grew 79.7% in the month ended June 15, reflecting arbitrage related to the triggering of warrants issued when the bank purchased Irving Bank Corp. in 1988.

The increase in Bank of New York's short position was among the biggest for bank stocks traded on the New York and American stock exchanges.

Short interest in bank stocks as a group grew 5.2% to 166.3 million shares.

There were also big surges in short interest in the shares of Fleet Financial Group and Norwest Corp. They were largely sparked by arbitrage activity surrounding pending acquisitions by those banks.

At the same time, short activity fell significantly in shares of Chemical Banking Corp., Citicorp, and BankAmerica Corp., reflecting the recent strong market for bank stocks amid falling interest rates.

Shorting a stock means selling borrowed shares. Short interest is the total number of shares of a company's stock that have been shorted - that is, borrowed but not yet repaid.

Traditional short sellers hope to profit from a fall in a stock's price. But much short selling these days is linked to sophisticated strategies to either hedge again losses or lock in gains on preferred stock and related securities.

It was the third large month-to-month increase in short interest in Bank of New York's stock. The total short position was 11.6 million shares on June 15, up 160% from the 4.4 million shares that were short on March 15.

Bank of New York currently ranks third in short interest, behind Citicorp and Fleet Financial. The short interest data is provided by the New York and American stock exchanges.

The increased short activity coincided with a strong showing by Bank of New York's stock price during the current quarter that last week activated subscription warrants related to the purchase of Irving.

The warrants were triggered last week after Bank of New York's stock price had surpassed the $31 exercise price on the securities for 11 weeks in a single quarter.

"It's important to understand that this short activity in Bank of New York stock is technical and not fundamental," noted George M. Salem, banking analyst at Gerard Klauer Mattison & Co., New York.

The warrants, highly usual in banking, were used by Bank of New York to sweeten its hostile bid for Irving and put an end to more than a year of resistance to that takeover.

The warrants allow former Irving shareholders, or those who now hold their warrants, to buy 27 million shares of Bank of New York's stock.

The rise in short activity in Bank of New York has also more than doubled the short interest ratio for its shares in the past two months, to 12.5 days on June 15 from 5.3 days on April 15.

This ratio is the number of trading days needed to "cover" the entire short interest position in a stock at the average daily volume in the shares. Volume in Bank of New York shares last month averaged about 935,000 shares daily.

Short activity also continued to rise in Fleet Financial shares in reaction to that company's pending purchase of Shawmut National Corp., Hartford, Conn. From May 15 to June 15 its short interest rose by 4.6 million shares, or 27.6%, to 21.1 million.

The short interest coverage ratio for Fleet, based in Providence, R.I., rose to 26.9 days as a result.

Short activity in Norwest rose by 2.7 million shares, or 38.4%, to 9.9 million. Most of the increase for the Minneapolis banking company is apparently linked to its pending purchase of Foothill Group Inc.

Citicorp, despite a decline last month of 2.9 million shares, still leads the industry, with a short interest position of 22.8 million.

The majority of Citicorp's short interest involves arbitragers focusing on the imminent conversion of preferred stock issued by the New York bank as part of its huge recapitalization effort several years ago.

In other bank stock-related activity, analysts at two securities firms on Thursday raised their earnings estimates for Wells Fargo & Co., San Francisco.

Raphael Soifer of Brown Brothers, Harriman & Co. upped his 1995 estimate to $20.50 per share from $18.50, because of the one-time gain the company will reap on the sale of its join venture with Nikko Securities.

Diane Glossman of Salomon Brothers Inc., citing the same reason, raised her estimate to $20.15 per share, from $17.80.

Wells Fargo said earlier this week it would sell its join venture to Barclays PLC for $440 million.

Mr. Soifer said he expects Wells Fargo to use proceeds from the sale for additional repurchases of its own stock.

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