Banking industry analyst Frank R. DeSantis Jr. of Donaldson Lufkin & Jenrette Securities Corp. upgraded J.P. Morgan & Co. on Monday, saying the "fear factor" is gone from its shares.

Mr. DeSantis put Morgan back on "outperform" status exactly a month after lowering it to "market performer" following news that Bankers Trust New York Corp. would sustain a first-quarter loss from trading reverses.

Morgan and Bankers Trust both derive sizable parts of their earnings from trading, and the analyst had feared that Bankers' setback carried "negative implications" for Morgan's stock.

But Morgan's better-than-expected results for the quarter have cleared the air, Mr. DeSantis said. In late trading Monday the company's shares were up $1.625 to $65.375.

The analyst said he felt the stock is still attractively valued despite a big jump on Thursday, up $3.125 to $63.75, after Morgan announced its earnings.

Morgan reported first quarter earnings of $1.27 a share versus $1.69 per share a year earlier, but the results were better than many Wall Street analysts had expected. Mr. DeSantis noted that the figure would have been closed to $1.44 if severance charges were excluded.

Bankers Trust is due to announce its first quarter results today.

The analyst said he was impressed by Morgan's "exceptional" $364 million of trading revenue for the winter period. "They had to have started in the hole," he said, referring to the poor trading environment during portions of the quarter.

"Debt trading was strong, particularly in Europe and Asia, and both positioning and client activity contributed to the results," he said. "Emerging markets revenues apparently benefited from a surge in prices at the end of the quarter."

Mr. DeSantis also was encouraged that Morgan had become more aggressive about controlling costs, given the uncertain outlook for future revenues.

Morgan's expenses were down 2% in the first quarter from the fourth quarter, excluding severance charges related to the 4% reduction in headcount during the period.

The company's costs were up 11% over a year earlier, but Mr. DeSantis expects flat expenses in the second quarter and more moderate growth during the rest of the year.

Meanwhile speculation about a merger between NationsBank Corp. and Chase Manhattan Corp. stirred activity in both stocks on Monday.

Chase shares rose $1 to $43 in busy trading Monday after a statement in last Friday's Wall Street Journal by NationsBank vice chairman and chief financial officer James Hance that it was interested in discussions.

Chase, whose annual shareholder meeting is today, declined any interest in talking with NationsBank. The Wall Street Journal said Mr. Hance had asked for a retraction of his statement after a complaint from the New York bank.

Mr. Hance reportedly declined to comment on the matter during a discussion Monday with securities analysts that was not open to the media. NationsBank shares were off 37.5 cents to $51.375.

Analyst Mark C. Alpert of Alex. Brown & Sons Inc. cut his rating on the shares to "buy" from "strong buy" previously, saying that concerns about a deal for Chase would restrain its stock price.

Speculation about a merger or breakup of Chase Manhattan began two weeks ago after activist investor Michael Price of Heine Securities, Short Hills, N.J., raised his stake in the company.

But Mr. DeSantis said he did not believe that Mr. Price "is enough of a catalyst to break up Chase Manhattan" or that the New York bank's management would be forced into a sale.

Chase also reported its earnings Monday and analysts said the moderately strong results did not appear to add any new pressure for dealmaking.

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