Merrill Lynch & Co. has finally joined the crowd on Citicorp, awarding the New York banking company's shares a "buy" recommendation.

Analyst Judah S. Kraushaar upgraded the stock after concluding Citicorp can consistently return 20% on equity. That puts it firmly among the industry's best performers.

In response, its shares jumped $1.625 on brisk volume to a new high of $69.375. The stock, fueled by numerous recommendations on Wall Street, is up an extraordinary 80% from its 52-week low.

Indeed, the stock has been touted so widely around the investment community that Mr. Kraushaar demurred, reserving the "buy" label for less well-known stories.

He said Thursday he had revised his thinking partly because of this year's big rally in bank stocks generally.

"In an environment where many bank stocks are fairly valued or even at overvalued levels, investors need to be looking for value that can be sustained beyond some of the hype we are seeing," he said.

Mr. Kraushaar said Citicorp made a strong presentation this week at Merrill Lynch's annual banking and financial services conference.

"They projected fairly dramatic improvement in profitability of both the branch banking business and the global finance business over the next two years," he said.

"Plus they expressed a high degree of confidence that the rate of return on other consumer businesses ought to be sustainable at around 23% to 28% (annually) going forward," he said.

"I think most people left the session feeling that, however bullish they had been about Citicorp previously, it is now possible to move up to another level of confidence," he said.

The Citicorp presentation at the investment firm's conference was led by vice chairman Pei-yuan Chia.

Mr. Kraushaar said the bank had also impressed institutional investors at the session with the big gains possible in global consumer banking from the use of advanced marketing technology in conjunction with its long- established brand name.

"They made a very strong case for the benefits available from the whole notion of brand identity backed by technology," the analyst said. "They are one of the few banks capable of potentially breaking away from being valued (by investors) as a typical bank."

Citicorp is viewed by many industry observers as possessing the top worldwide franchise of any American bank, especially in the area of consumer banking.

"Marketing-driven" business strategies are much in vogue on Wall Street right now, with investors worried that many of the nation's banks face daunting challenges to revenue growth in the future.

The problem of this looming "revenue wall" is considered to be prime driver of the wave of mergers that washed over the banking industry this summer.

Some analysts and investors have focused on Citicorp and a handful of other banks as having the ability to keep building revenues without the expense and distraction of acquisitions.

While Mr. Kraushaar feels that is true for Citicorp in the immediate future, he questioned whether the assumption will be valid indefinitely.

As we move into next year and 1997, it is possible that this thesis will have to be tested." the Merrill Lynch analyst said.

Elsewhere, shares of Shawmut National Corp., Hartford, Conn., rose 87.5 cents to $34.375 after being elevated to "buy" from "hold" by analysts at CS First Boston Corp. Shawmut is set to be acquired by Fleet Financial Group Inc.

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