The bleeding may have slowed at Wells Fargo & Co., but it probably hasn't stopped yet, analysts say.

Share prices of the San Francisco-based banking company have been the year's biggest disappointment, and analysts expect the earnings nadir in the third quarter.

"It's going to be a tough quarter for them," said Keefe, Bruyette & Woods Inc. analyst Thomas Theurkauf. "They're a big banking company, and you can't turn around the revenue problems they have on a dime."

Although Wells stock has recovered somewhat of late-the per-share price has risen to around $280 in recent days after having fallen to $246 April 21-the bank has seriously underperformed the Standard & Poor's bank index this year. Wells shares have risen only 3.5% since Jan. 1, while the S&P bank index has soared 37.3%.

Wells' market valuation, profitability, and prestige in the banking industry have suffered because of difficulties absorbing First Interstate Bancorp, which Wells bought in 1996 for $13.2 billion after a hostile takeover battle.

Wells' first-quarter earnings this year of $3.62 per share were below the Wall Street consensus by 13 cents. And the bottom fell out in July when the bank's second-quarter earnings slumped 37% from a year earlier. Wells had originally forecast the merger would add 18% to earnings in 1997 and 23% in 1998.

The disappointing second-quarter results prompted many analysts to slash their earnings estimates and downgrade the stock. Some analysts, including Merrill Lynch & Co.'s Sandra J. Flannigan, think third-quarter results will be even worse. A Wells spokeswoman said third-quarter earnings would be released Oct. 21.

Some investment bankers say Wells doesn't have much time to turn the ship around. They note that 70% of Wells' shares are owned by institutional investors, the second-highest level among the 10 biggest banking companies. (Banc One Corp. has the biggest institutional ownership, almost 77%.) Such shareholders could quickly grow impatient with subpar performance - and be willing to listen to outside offers.

Wells' problems have thrust into bold relief the potential problems all banks face as they struggle to meet Wall Street expectations about bank consolidation.

The Street loves mergers, but it wants them to add to earnings quickly- within 12 to 18 months, at most. However, because banks find it necessary to pay huge premiums to make acquisitions (Wells paid a 26% premium for First Interstate), they must aggressively slash costs while boosting revenues to meet the expectations.

Wells, for example, aimed to cut $800 million in annual expenses within 18 months after completing the merger.

Cutting costs drastically while expanding or even just maintaining a business is extremely difficult, particularly in an industry as mature as banking, observed Mark L. Sirower, professor of management at New York University and author of "The Synergy Trap."

In banking, he said, most companies offer similar products. That means customers disgruntled with one company's service cuts can easily find another with similar offerings.

It didn't take much for the market to show just how much its faith in Wells had been shaken. On Aug. 20 the bank's share value plunged $16.50 in a single afternoon (although it recovered to a $7.50 loss by the close) after a false report surfaced that vaunted investor Warren E. Buffett had sold all his shares in Wells. The bank stemmed the panic by saying that Mr. Buffett remained a "substantial" shareholder.

Meanwhile, for all Wells' well-publicized problems, some analysts are starting to see signs of improvement, although few are ready to recommend buying the stock just yet.

"The operational problems caused by the First Interstate integration appear behind them," said Keefe Bruyette's Mr. Theurkauf. "But they've lost a lot of customers, and it will be hard to get them back."

Merrill Lynch's Ms. Flannigan said the bank "is off life support but not fully out of the woods."

Revenue growth, she said in a recent report, remains a major problem. Loans aren't growing, and deposits are expected to shrink by at least another $1 billion because of sales of branches necessitated by the in- market First Interstate merger.

That said, losses of customers outside California-one of the bank's biggest problems after the merger-have at least slowed and may even have been reversed in Texas and Colorado.

The bank is also working to repair its "high-tech, low-touch" image among consumers.

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