Signet Banking Corp.'s stock rose on news of upgrades by Goldman, Sachs & Co. and Dean Witter Reynolds Inc.

Analysts at the two firms shrugged off last week's disclosure of the bank company's $81 million exposure to an allegedly fraudulent loan and cited Signet's innovative consumer credit products and its sophisticated credit scoring models.

Analysts Robert Albertson and Lori Appelbaum of Goldman Sachs upgraded Signet from "moderate outperformer" to "recommended list buy." Anthony Davis, an analyst at Dean Witter, upgraded the bank from "accumulate" to "buy." The upgradings put Signet in the two firms' highest rating categories.

Signet shares closed at $25.50, up 75 cents.

The bank's stock price had plunged 5% last week after the big problem loan came to light. Some analysts raised the possibility of lawsuits against Signet by banks that had participated in the Signet-led loan.

But Mr. Davis of Dean Witter said he viewed the questionable loan as "only an isolated event," which will not affect Signet's performance.

He projected a share price of $31 and $2.35 of earnings per share this year, $35 and $2.85 per share in 1997.

The company's loan-by-check program could produce "a tremendous improvement in profitability," said Mr. Davis. The loan-by-check is a stand-alone, preapproved loan that is mailed directly to prospective borrowers.

Goldman's Ms. Appelbaum also regarded the loan incident as an aberration. She said she was comfortable with the bank's credit underwriting procedures, adding that Signet has taken steps to prevent similar problems.

She also pointed out that the bank expects to recover two-thirds of the loan in question.

Investors should focus on the bank's menu of strong consumer credit products and on its Information-Based Screening technology, she said.

Not all analysts were as sanguine about Signet.

"The fraud adds doubts and concerns," said Livia Asher, an analyst at Merrill Lynch & Co. "Where were the internal controls? I wouldn't have upgraded."

Ms. Asher argued that the dip in Signet's price was not enough to create a buying opportunity.

She added that she has concerns about the bank's loan-by-check program in a time of high consumer delinquencies.

Separately, Ruchi Madan of Prudential Securities Inc. initiated coverage of NationsBank Corp. with a "buy" rating, saying the stock is a bargain.

Ms. Madan noted that NationsBank trades at a price multiple of only 8.2 compared to projected 1996 earnings, a 15% discount from the multiple for other superregionals. NationsBank shares closed at $75.875, up 62.5 cents.

Banks generally withstood Monday's market downdraft. The S&P bank index rose 0.99%, to 363.55, while the broader S&P 500 index fell 0.09%, to 650.04.

Mr. Albertson, at Goldman Sachs, said a positive government report on sales of existing homes was seen as good news for banks.

Big gainers included BankAmerica Corp. $1.25, to $76.875; J.P. Morgan & Co. $1, to $84.625; SunTrust Banks Inc. $1.25, to $72.50; and State Street Boston Corp. $1.75, to $50.625.

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