Investors are betting on a renewed wave of bank mergers in coming weeks, anticipating that buyers will rush to make deals soon in order to complete them before yearend.

Companies that investors, arbitragers, and analysts think may sell soon include Crestar Financial Corp., Keystone Financial Inc., and First American Corp.

Investors bid up Crestar shares 5%, more than any other southern regional bank, in the five days before earnings were reported, on speculation that the company is in talks. Crestar declined to comment.

Crestar of Richmond, Va., has $26.2 billion of assets and is considered valuable because of its presence in the northern Virginia and Maryland suburbs of Washington. Keystone, which has $6.9 billion of assets, is the largest independent bank left in Pennsylvania. First American, a Nashville banking company, has $15 billion of assets and is considered one of the best at cross-selling.

Investors theorize that now would be a good time for these banks to listen to would-be bidders because buyers may be tempted to raise their bids to complete mergers by yearend. That would let them then devote their energies to the issue of year-2000 computer problems.

Usually, it takes four or five months for an acquiring bank to close a merger.

"The general consensus is, get the deals done now because the closer you get to 2000, the more questions people are going to ask," said Eric Rothmann, bank analyst at Stephens Inc.

Analysts consider Wachovia Corp. to be the most logical buyer of Crestar. The Winston-Salem, N.C., banking company moved into Virginia last year with acquisitions of Jefferson Bankshares of Charlottesville and Central Fidelity Bank of Richmond.

First Union Corp., though it bought Signet Banking Corp. last year, is not considered a likely buyer because acquiring Crestar would likely "dilute"-weaken earnings per share of-the stock of First Union.

BB&T Corp., which last week closed its first acquisition in the Washington area, is considered a more likely bidder than First Union.

Analysts said Wachovia could offer about $75 per share, or about a 30% premium over market price, without hurting future earnings. Wachovia's stock trades at a higher multiple than Crestar's, meaning Wachovia could afford to make the deal without hurting its earnings per share.

"Crestar's deposits are significantly weighted in northern Virginia, while Wachovia's are more in the south," said Edward Najarian, bank analyst at Wheat First Union, Richmond. "There would be some overlap in Richmond, but I think the two franchises could come together and there would be less divestitures than many people think."

In Crestar's defense, Davenport & Co. analyst David West said it can justify continued independence because it has been able to siphon off business from Virginia newcomers Wachovia and First Union. "They've had some pretty good success in attracting commercial loans," Mr. West said.

That will be especially important because Crestar's own acquisition strategy of buying smaller banks within its Virginia and Maryland markets appears to have been frustrated in recent months. The company failed in its effort to acquire George Mason Bankshares, Fairfax, Va., which in April was sold to United Bankshares of Parkersburg, W.Va., according to a person familiar with the situation.

At Keystone, based in Harrisburg, Pa., the story appears to be one of a bank hemmed in by bigger players, such as Allied Irish Banks and First Union, that reduce the chances for a level of earnings growth investors demand nowadays. But a buyer for Keystone is not so apparent as for Crestar.

"Our thinking is, the best defense is a good offense," said Keystone's chief financial officer Donald F. Holt. When the company reports earnings next week, investors are likely to look for better "offense" than the first quarter's 6% growth rate or 14.2% return on equity.

Shares of First American have floundered since December when it said it would buy Deposit Guaranty Corp., Jackson, Miss. Many analysts thought the company overpaid, and its stock price has stuck around $48 a share since. "They should sell sooner rather than later," said Warburg Dillon Read analyst Thomas H. Hanley.

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