Merger conjecture is growing concerning Fleet Financial Group Inc., with the possibility of a deal with First Union Corp. or PNC Bank Corp. high on some lists.

Speculation appeared to lift the stock Thursday morning when shares of the Boston-based company advanced in a down market. Fleet's shares surged to a new 52-week high of $90.3125, but later slipped back as the Dow Jones industrial average fell more than 100 points during the day.

Fleet's shares eventually closed down 68.75 cents, to $88.50.

Nevertheless, market murmurs about Fleet as the next possible major takeover target persisted as banking industry consolidation intensifies. The rumors have not been dampened by the recent comments of Fleet management.

Asked about a possible merger of equals during a Thursday morning conference call, Eugene M. McQuade, Fleet's chief financial officer, remarked to financial analysts that "scale is important, and if you can get scale with little to no premium, I think that certainly becomes something we would be very interested in."

Fleet's chief executive, Terrence Murray, offered a similar observation to reporters at the company's annual meeting in Boston on Wednesday.

The recent spate of mega-size bank deals has fueled investor imaginations about who may be next.

"Many of the recent mergers have happened a lot faster" than people anticipated," said regional bank analyst Sally Pope Davis of Goldman, Sachs & Co. "People have had to go back to their drawing boards."

First Union potentially acquiring Fleet is hardly a new idea for the investor community, said bank analyst Michael L. Granger of Fox-Pitt, Kelton Inc. There is considerable overlap between the two companies, he pointed out.

Bank analyst Anthony R. Davis of SBC Warburg Dillon Read & Co. said, "First Union could probably pay a 25% premium for Fleet and eliminate 20% of Fleet's expenses."

At the same time, such a combination has its naysayers.

The notion that "size gets increasing profits has yet to be proven," commented Lawrence W. Cohn, research director of Ryan Beck & Co., Livingston, N.J.

Others cautioned that First Union is still trying to digest its CoreStates deal and surmised that the Charlotte, N.C.-based company would probably not be making a move anytime soon.

In a Thursday report to clients, bank analyst Ruchi Madan at PaineWebber Inc. argued that a deal between the two companies does not "make sense."

Ms. Madan said First Union would give Fleet a price of about $100. But, "we believe that Fleet shares would reach that level anyway," she said.

Ms. Madan, who upgraded PNC to "attractive" from "hold" on Thursday, said a much likelier combination would be between Fleet and PNC.

Talks between those two companies probably broke down because of management issues, Ms. Madan said. But she said, "We think management may reconsider these issues, given the changing landscape, as a result of recent deals."

Meanwhile, First Union's shares advanced in a falling market as the company began buying back its stock, traders said. First Union said it would issue 40 million shares to purchase Money Store and then repurchase them, analysts said.

First Union's shares rose 31.25 cents, to $60.5625, on a day when disappointing first-quarter earnings from Merck & Co. dragged the Dow down 0.94%. The Standard & Poor's bank index fell 2.05%, the Nasdaq bank index 0.57%, and the S&P 500 1%.

Gainers of the day included Capital One Financial Corp., whose shares surged 10.27%, after the company beat its first-quarter earnings by 8 cents. Capital One's shares jumped $9.0625, to $97.3125.

Golden West Financial Corp. was upgraded by Goldman Sachs to "market outperform" from "market perform." Golden West's stock rose $2.50, to $105.625.

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