Shares of KeyCorp gained on news of an upgrade by Fred A. Cummings of McDonald & Co., who noted signs that a restructuring unveiled last fall is on target.

"We believe this company's going to regain the confidence of Wall Street, as it's now delivering on promises," Mr. Cummings said after reviewing the Cleveland banking company's second-quarter earnings report.

KeyCorp shares, which jumped $2.31, to $58.56 Tuesday, could rise to $68 in six to nine months, Mr. Cummings predicted.

KeyCorp lost the confidence of analysts after it failed to hit revenue targets that executives had set for a merger of KeyCorp, Albany, N.Y., and Society Corp. in 1993.

Faced by skepticism on Wall Street, "they said, 'we've got to change that from a revenue story to an efficiency story,'" Mr. Cummings said. That decision led last November to the restructuring program.

The analyst said the company is well on its way to achieving goals that included the sale of 140 branches, a consolidation of 280 branches, and a 2,700 reduction in employees.

He also noted that the company's efficiency ratio has improved to 55%, from about 60% when the restructuring was announced.

Mr. Cummings said KeyCorp's failure to meet merger targets has made him more skeptical of management projections of revenue gains in a merger.

But he noted the situation was different from Wells Fargo & Co.'s disappointing merger with First Interstate Bancorp.

KeyCorp, he said, did not predicate its merger on eliminating overlapping branches and did not suffer any loss of customers.

Thomas D. McCandless of Natwest Securities acknowledged that KeyCorp has made progress with its restructuring and praised recent initiatives to establish a brand identity.

But he said he would have to see further evidence of earnings growth before upgrading the stock from "underperform."

KeyCorp's 13% growth for the quarter was in line with the rest of the industry, Mr. McCandless said, but he still projects growth "a little below average."

However, Mr. Cummings says the stock, currently trading at about 12 times earnings, will soon trade at the same level as the average bank he follows-14.5 times earnings.

Bank shares rallied strongly Tuesday afternoon, spurred by upbeat testimony by Federal Reserve chairman Alan Greenspan. (See article on page 1.) The S&P bank index rose 2.1%, to 568.51, while the S&P 500 jumped 2.3%, to 933.91.

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