Merger speculation boosted the stock of NationsBank Corp. and BankAmerica Corp. early Monday, but interest waned as analysts expressed skepticism that a deal was imminent.

By early afternoon, NationsBank shares were at $70.575, up 75 cents but off the morning high of $71.75. Shares of BankAmerica were up $1.125 to $63.75, after trading as high as $64.625 after the opening bell.

The speculation, heightened by the recent news of a possible combination of BankAmerica's San Francisco rival Wells Fargo & Co. and Los Angeles- based First Interstate Bancorp, also was felt in the bond market. Spreads on NationBank debt over comparable Treasury securities tightened noticeably early Monday, indicating a favorable reaction by investors.

The market activity followed reports in the weekly business newspaper Barron's and other media that the two banks may be contemplating a merger that would create the nation's largest bank, with more than $400 billion of assets.

Several analysts acknowledged hearing of overtures between the banks, but said the investor reaction was overblown.

"It's another case of investors saying, 'if it's moving, fire at it,' " said Carole S. Berger of Salomon Brothers Inc.

"NationsBank seems to be focused on internal profitability improvement" rather than pursuing a major merger, said Anthony Davis of Dean Witter Reynolds.

Mr. Davis said the stock market has been surprised at the magnitude of merger deals announced so far this year, and has therefore tended to overreact to rumors and speculation.

Nancy Bush, at Brown Brothers Harriman & Co., said once people analyzed the potential deal, they would cool to it. For one thing, she said, there would be little opportunity for cost-cutting after a merger of the two, because BankAmerica and Charlotte, N.C.-based NationsBank hardly overlap.

Ms. Berger said the need for technology which has motivated some companies to seek partners is not a factor with NationsBank or BankAmerica. Both companies are large enough to survive on their own, she said.

Bond analysts, however, seemed cheered by the idea of a potential deal, predicting it would result in upgrades of the debt ratings of both companies from their current low single-A levels to the middle of the single-A range.

What's more, a megamerger would provide Richard Rosenberg with the opportunity to put an exclamation point on his career when he retires as BankAmerica chief executive in January, said Thomas K. Brown, banking analyst at Donaldson, Lufkin & Jenrette.

Separately, Mr. Davis on Monday downgraded five regional banks after a review of third-quarter earnings reports convinced him that margin compression next year will be about 15 basis points greater than expected and that loan loss provisions could be about 50% higher.

Mr. Davis lowered his ratings on Barnett Banks Inc. and First Bank System Inc. to "accumulate" from "buy," and lowered ratings on PNC Bank Corp., Crestar Financial Corp. and Boatmen's Bancshares to "neutral' from "accumulate."

Mr. Davis emphasized that he remains generally positive on the banking sector, and noted that his rating change on PNC was based "primarily on price." The shares were trading at $27.75 early Monday afternoon, off 50 cents for the day, and down $1.625 from their 52-week high.

Goldman, Sachs & Co. upgraded Bankers Trust New York Corp. to "moderate outperformer" from market underperformer," citing the bank's third-quarter earnings and Frank Newman's selection as chief executive officer.

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