Citicorp and Wells Fargo & Co. - bank stocks that investors either love or hate - got bouquets from Wall Street supporters on Tuesday.

Fans have driven up the prices of these two turnaround stocks by over 25% this year. But detractors are skeptical that Citicorp and Wells will be able to continue their recoveries from severe loan problems that began in the late 1980s.

Citicorp got its boost from Frank R. DeSantis Jr. of Donaldson, Lufkin & Jenrette Securities Corp.

Mr. DeSantis said Tuesday that he expects the banking company to earn $4.50 a share in 1994, rather than the $4.10 he previously forecast. He left the $3-a-share 1993 projection unchanged. The company earned $1.35 a share last year.

Lower Credit Costs

The 40-cent-a-share increase in the 1994 estimates equals $200 million in earnings, which will come mostly from a rapid lowering of credit costs, such as reductions in loan losses and in the cost of carrying foreclosed real estate.

Robert Albertson, an analyst with Goldman, Sachg & Co., said Tuesday that he strongly recommends purchase of shares of both Citicorp and Wells Fargo, turnaround stocks with significant potential for higher earnings as they work through bad loans and sell foreclosed properties.

"We are pounding the table for these stocks, but this time with a big hammer," said Mr. Albertson. "We are fascinated by the valuations."

Citicorp shares rose $1.125 cents to $29.25, and Wells shares rose $2.375 to $105.75.

Earning Power Seen Slighted

"The market consistently underestimates the earning power of Citicorp," said Mr. DeSantis, who predicts Citicorp shares will trade at $45 by 1995. Mr. Albertson's price target is more aggressive: $42 by yearend.

Mr. DeSantis has boosted his earnings forecast for Citicorp three times in the past six months, as his confidence in its ability to benefit from declining credit costs has increased.

Mr. DeSantis said that expenses associated with bad loans and foreclosed properties, which reached $1.2 billion last quarter, are declining at a faster rate than he previously thought.

He believes the bank will reduce those credit costs to around $3 billion by 1995 from $6.4 billion last year. If the bank is successful, the lower credit costs will translate into a $3.60 jump in per-share earnings.

Bearish on Revenue Growth

Mr. DeSantis is not counting on revenue growth to contribute much to earnings. He forecast a growth in core earnings - before credit costs and taxes - of 5% to 7% in 1993 and 1994.

If the bank fails to make that modest increase, it has room to increase earnings by reducing expenses. Citicorp, once one of the most bloated banks, has reduced expenses by $1 billion in the past two years.

The bank's overhead ratio in the first quarter was 62%, versus 63% for all the banks Donaldson, Lufkin & Jenrette follows - the first time Citicorp's ratio was better than average.

Willingness to Cut Deeper

Mr. DeSantis believes that senior management has the resolve to slice another $1 billion off expenses if revenues show no signs of growth. Indeed, Mr. DeSantis said senior management's tougher attitude toward expenses is one reason he is so bullish on the shares.

Wells Fargo can also generate earnings even if revenues don't increase - by reducing its credit costs. But Mr. Albertson said Wells' senior management told him that loan demand is already back and may be apparent in the second-quarter earnings release.

Judah Kraushaar, an analyst with Merrill Lynch & Co., increased his 1993 per-share earnings estimate for Wells to $7.60 from $6.65.

Next year's earnings will be $11.40, up from the $11.10 Mr. Kraushaar recently forecast. Last year, Wells Fargo earned $4.44 a share. His price.target: $150 by yearend 1994.

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