PaineWebber Inc. initiated coverage on 15 regional banks Thursday, putting "strong buy" recommendations on three institutions.

The "buy" nods went to Barnett Banks Inc., BayBanks Inc., and CoreStates Financial Corp.

In late trading, Barnett's shares were up 75 cents to $47.75, BayBanks' 62.5 cents to $41.75, and CoreStates' $1.125 to $54.125.

Growing Differences

Thomas D. McCandless, who recently joined PaineWebber from Goldman, Sachs & Co., also rated five banks as "attractive" and gave seven others "neutral" rankings.

The recommendations for Barnett and CoreStates came a day after both were dropped to "hold" from "buy" status by George M. Salem of Prudential Securities Inc.

The split between analysts highlights growing differences on Wall Street about the future course of bank stocks, the challenges facing the industry, and how well prepared specific banks are to meet those challenges.

Some analysts are very bearish. Mr. Salem downgraded eight banks on worries about their earnings power in an environment of sluggish loan and deposit growth. He said he is increasingly concerned about banks "losing market share within the financial system."

In the Middle Camp

Other analysts, citing record profits and fat net interest margins, believe the environment for banks has never been better.

Mr. McCandless, however, is in the middle camp.

He stated that he was in "total agreement with a school of thought that believes the banking industry has probably reached maturity in its life cycle and is now in the early stages of slow secular decline."

But he said companies like Barnett, BayBanks, and CoreStates have "specific dynamics in their earnings outlook" that deserve "buy" ratings.

Barnett Ahead of Timetable

He pointed out that Barnett, in defiance of skepticism on Wall Street, is ahead of its timetable in cost savings after the acquisition of First Florida Banks.

The Jacksonville-based bank has relationships with 40% of all Florida households and stands to reap further growth within the state's huge trust banking market, he said.

Philadelphia-based CoreStates, he said, benefits from "reinvigorated senior management." The bank dominates middle-market lending in the Middle Atlantic region.

|Clearly Among the Best'

Its financial profile, he said, is "clearly among the best" with a balance sheet "beyond the well-capitalized level."

And BayBanks, he noted, is by far the dominant consumer bank in Boston, with 50% of that market. Usage of its automated teller machine system is among the highest in the country.

The company has been able to blend marketing innovation with technological prowess and its management is shareholder-oriented, Mr. McCandless said.

On the overall picture, though, his view does not differ sharply from Mr. Salem's.

While banks generally are in robust financial health now, Mr. McCandless lamented the dearth of profitable lending opportunities and the "unequal playing field" against nonbanks.

Mr. McCandless awarded "attractive" ratings to Republic New York Corp.; First American Corp., Nashville; Fifth Third Bancorp, Cincinnati; and Norwest Corp. and First Bank System Inc., Minneapolis.

He described these banks as having "less attractive valuation levels near-term but excellent long-term growth prospects."

The analyst was "neutral" on Bancorp Hawaii Inc., First Hawaiian Inc., Signet Banking Corp., Richmond; Society Corp., Cleveland; State Street Boston Corp.; Wachovia Corp., Winston-Salem, N.C.; and NBD Bancorp Inc., Detroit.

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