The short position in Fifth Third Bancorp tripled during the 30 days ended March 15, an increase that analysts attributed to arbitrage activity.

Fifth Third's short interest rose 202.2%, to 2.36 million shares, pushing the bank's short position into second place among financial stocks traded over Nasdaq. Only Olympic Financial Ltd.'s 4.7 million-share short position was larger. (See tables this page and page 28.)

Short interest is the outstanding volume of shares sold short, that is, borrowed and promptly sold. Short sellers commonly are betting that the stock price will fall so that the borrowed shares can be replaced profitably with cheaper shares.

But analysts said the short position in the well-regarded Cincinnati bank could result from technical factors. "There is no fundamental reason for the bank to be shorted," said Livia Asher of Merrill Lynch & Co.

Fifth Third's March 7 inclusion in the S&P 500 index and the expectation that the bank could convert $143 million of debt to 3 million shares of common stock probably contributed to the rise in the short position, analysts said. Fifth Third shares closed trading Wednesday at $58.50.

"With Fifth Third's addition to the S&P 500, there was naturally a high level of buying activity from the index funds. I suspect that some of the sellers may have shorted the stock," said Joseph C. Duwan, analyst at Keefe, Bruyette & Woods Inc.

The expectation that Fifth Third may convert outstanding convertible debt also could influence the short position, said Mr. Duwan. Sophisticated investors, hoping to lock in gains on the spread between the stock price and the value of the convertible debt, may be selling the shares short, analysts said.

In trading Wednesday, NationsBank Corp.'s stock rose $1.50 to $78.25 on news of an upgrading by UBS Securities.

Analyst Thomas Hanley, who recently left CS First Boston Corp. for UBS, upgraded NationsBank to "buy" from "hold." He had also rated the stock a "buy" at CS First Boston.

"We are reinitiating coverage on NationsBank," wrote Mr. Hanley in his report. "We have long believed that NationsBank's extensive retail and wholesale banking franchises are two of the most powerful in the nation."

Mr. Hanley also predicted Citicorp 1997 earnings per share would be $8.75 - 15% better than UBS had previously estimated. He said Citicorp "could repurchase another $4.9 billion worth of stock before the end of 1997," or 15% of shares outstanding at the current price.

Gerard Klauer Mattison downgraded Wachovia Corp. to "hold" from "buy," sending shares 25 cents lower, to $45.625. Analyst George Salem changed his recommendation because he said recent conversations with officials of Wachovia and SunTrust Banks Inc. persuaded him that a merger is less likely than he had thought.

Salomon Brothers analyst Jeffrey Naschek downgraded Mercantile Bancorp shares to "hold" from "buy," reducing his 1996 earnings projection to $3.85 per share, from $4.30.

Mercantile's shares were unchanged at $45.25.

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