The Wachovia Corp. story is being misunderstood by investors, an analyst said.

Shares in the Winston-Salem, N.C.-based banking company are "among the best bets in the bank group today," based on above-average earnings growth and strong credit management, said Susan Roth, a banking analyst with Donaldson, Lufkin & Jenrette.

"Wachovia has long been praised for its credit management expertise," Ms. Roth said. "What appears to be less well known and appreciated is its willingness to embrace change, invest, and manage for sustainable long-term growth."

The proof of the banking company's success lies in its revenues-which grew 10% in 1997 and 15% in 1998, Ms. Roth said.

Wachovia's profit margin should improve by as much as 100 basis points in 1999 and hold firm if not strengthen a bit further in 2000, Ms. Roth said.

"As 1999 progresses, we expect a greater appreciation for the sustainability of Wachovia's revenue growth and earnings stream to manifest itself," Ms. Roth said.

Wachovia shares were up $1.25 on Wednesday, to $82.50.

The activity came as bank stocks rallied along with the broader market. The Standard & Poor's bank index added 2.85%, and the Dow Jones industrial average was up 1.22%. The Nasdaq Bank Index gained 0.20% and the S&P 500 0.68%.

Large bank stocks did especially well. Citigroup added $4.6875, to $71.6875; Chase Manhattan Corp. was up $5.125, to $84.375; and J.P. Morgan & Co. gained $3.50, to $127.4375.

"We're seeing some pretty strong gains among the larger capitalization group," said Frank Barkocy, a principal at Keefe Managers. "Value buyers are stepping up to take advantage of good fundamentals within the group as well as valuations."

Among regionals, First Union Corp. added $1.875, to $54.1875; KeyCorp was up $1.1875, to $30.6875; and Mellon Bank Corp. added $1, to $71.1875.

Shares of Fleet Financial Group were up $2.0625, to $39.50.

Fleet's stock has declined 15% since its merger with BankBoston Corp. was announced last month. Meanwhile, bank stocks across the board suffered only a 3% decline, and the S&P 500 handed shareholders a 2% return.

Thomas Hanley, a banking analyst at Warburg Dillion Read, said Fleet's stock has been unfairly hit.

Mr. Hanley estimated that the new Fleet Boston would have almost 30% or more in deposit market share in the three most important New England metropolitan areas-even after the Justice Department requires $13 billion in deposit divestitures. The new company will have "complete dominance of business banking in the region," he added.

Mr. Hanley said he expects profits at Fleet Boston to be higher in nonbanking business lines such as investment banking, credit cards, and commercial finance, while commercial and consumer bank earnings shrink dramatically because of divestitures.

Fleet should post annual earnings per share growth of 16% from 1998 to 2001, while return on assets may reach 1.52%. Return on equity could be as high as 20.2% in 2000, Mr. Hanley said.

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