The rumor mill is working overtime.

Mellon Bank Corp. could be the next takeout target, according to reports on Friday that capped a week of virtual nonstop scuttlebutt about potential acquisition deals.

Stories swirling around Wall Street concerned American Express Co., Donaldson Lufkin & Jenrette Securities Corp., State Street Corp., and Lehman Brothers Inc.

"The economics for acquisitions work out so well," said Anthony R. Davis, banking industry analyst at Dillon, Read & Co., New York.

"Banks' market capitalizations are at record levels, and yet the top 35 banks are sitting on over $500 billion in capital," he said. "There is a tremendous advantage for banks to consolidate relative to street firms and insurance companies."

Market sources said Mellon could be sold for up to $60 per share. The roster of potential buyers for the $42.5 billion-asset Pittsburgh banking company includes NationsBank Corp., Chase Manhattan Corp., First Union Corp., Northern Trust Corp., and Bank of New York Co.

The Mellon rumor was first reported Friday in the on-line version of BusinessWeek magazine. Mellon's shares remained unchanged at $46.25, as other bank stocks slipped amid profit taking and "triple-witching" activity caused by expiring options.

Mr. Davis, who initiated coverage of Mellon with a "buy" rating on Friday, said that he is not surprised by the reports.

"Mellon has a $12 billion market capitalization, which in the context of some of these larger companies makes it acquireable," he said. "It also offers significant cost savings and an earning per share dilution which is quite tolerable."

Other attractive features include its strong trust business and securities operation, added Mr. Davis. His estimates earnings are $2.90 per share this year and $3.25 next year. His stock price target price is $54.

Scott Edgar, director of research at the $800-million Sife Trust fund, Walnut Creek, Calif., pointed out that Mellon has been a "perennial" favorite as far as takeout rumors go. But he doesn't dismiss the idea that an acquisition could be in the making.

"The rumors lately have had some foundation in reality," said Mr. Edgar. "Not all the rumors have bore fruit, but BankAmerica's acquisition of Robertson, Stephens & Co. was a rumor just before the deal was announced."

Portfolio manager A. James Ellman of GT Global Financial, a $55 million fund, pointed out that Mellon's management has often stressed their independence but could sell at the right price.

Mr. Ellman added that Mellon would more than likely be acquired by a foreign bank because companies in Europe and Germany are attempting to build up their corporate finance businesses.

Analyst George M. Salem of Gerard Klauer Mattison & Co. remained dubious.

"It's not out of the question, but I think a (takeover of Mellon) is highly improbable," said Mr. Salem. "For one, Mellon is very large and the total cost would be high.

"I don't think NationsBank is quite ready because they are still digesting Boatmen's (Bancshares)," he said. The chances of a deal involving Chase Manhattan are "slim to none," he said.

Mr. Salem said Bank of New York "may buy a piece of Mellon, which would be the processing operations," but he dismissed the idea of Chicago's Northern Trust as "just silly because they are smaller than Mellon."

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