Hugh L. McColl Jr. may just be California dreaming, but Wall Street isn't taking any chances.

Shares of two large California banks, Wells Fargo & Co. and First Interstate Bancorp, jumped this week after the NationsBank chief executive was quoted as having said California remained the only big market he was eager to enter.

NationsBank, based in North Carolina, can't legally buy a California bank now. But analysts noted that Mr. McColl has found ways around legal barriers before.

"It probably won't happen next week, next month, or even next year, but I wouldn't dismiss it," said Anthony Davis of Wheat First Securities Inc., Richmond, Va.

Big Percentage Gains

Even after dropping Thursday, Well's shares were up $3.25, or about 4%, to $78.375 on the week. First Interstate stock, still on the upswing Thursday, had gained $2.125, or about 5%, to $47.625 on the week. Volume in both stocks has been heavy.

Wells and First Interstate declined to comment on the rumors. NationsBank earlier confirmed Mr. McColl's remarks.

"Hugh McColl was serving notice and making clear his aspirations," said Brent B. Erensel of UBS Securities Inc. "Whether he gets to act on this is entirely a different matter, but I would never totally dismiss it."

Lack of Reciprocity

"Hugh McColl is a man who tends to speak his mind," said John J. Mason of Interstate/Johnson Lane in Atlanta. "But in this instance, I would say he was probably speaking longerterm rather than shorter-term."

At present, both California law and the southeastern regional agreement under which NationsBank operates would bar any merger by it in the Golden State.

The regional agreement leaves some wiggle room because it allows 20% of a bank's deposits to be held outside the Southeast. NationsBank's Texas operations would not be counted because they were acquired in a federally assisted transaction.

Analysts estimated that NationsBank could buy a $15 billion banking company outside its region under the compact. But since there is no reciprocity between California and states in the Southeast compact, a NationsBank move into California would not be permitted.

But Mr. McColl and NationsBank could lobby the legislatures in California and North Carolina to change their laws. His forces could also lobby in Congress and the Clinton administration to push full interstate banking.

News Magazine's Interview

Mr. McColl's remarks appeared this week in The Economist, a British weekly news magazine.

The magazine described NationsBank as "among a handful of regional banks with the scope and strength to develop a national presence" and Mr. McColl as "a maverick ex-soldier who reminds many people of his friend Ross Perot."

It noted what it termed the North Carolina banker's "uncanny instinct for deals" and "remorseless quest for growth." And about California there was this:

"Mr. McColl is bullish about opportunities for deals that will fill gaps in NationsBank's network, but suggests that the only big market he is really keen to enter is California.

"Acquisition, he agrees, is the only way in; he will not be drawn [out] on whether he might have Wells Fargo or First interstate in his sights. If he has, NationsBank can be expected to double in size again by mid-decade."

With a market value of about $12 billion, second among banking companies only to Bank-America Corp., NationsBank is among, the handful of banks that could potentially swing a deal for either Wells or First Interstate. The two California companies have market values of about $4 billion and $3 billion, respectively.

With the customary premiums, that would put the size of potential deals at roughly $5 billion for Wells Fargo and $4 billion for First Interstate.

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