Bank stocks' strong performance during the first quarter has left some people encouraged about the rest of the year and others worried.

The American Banker index of the nation's 225 largest publicly traded bank stocks advanced 10% during the winter quarter and topped the performance of stocks in general. An American Banker survey shows the greatest returns to investors in the quarter were provided by Shawmut National Corp., Putnam Trust Co., and Michigan National Corp., which are being acquired, as well as some banks with turnaround stories to tell.

(Bank shares, continuing their ascent in the first week of April, rallied sharply Thursday on news that Michael Price, a well-known value investor, has added to his bank holdings with a big purchase of Chase Manhattan Corp stock. See article on back page.)

The sharp reversal from the bear-market climate of last fall was spurred by growing investor sentiment that interest rates are near their peak, with a "soft landing" of the economy to follow.

Avoiding a recession and the consequent asset-quality problems would be good news for bank stocks, many analysts believe.

Thomas H. Hanley of CS First Boston Corp. thinks the bank stock environment "will become increasingly favorable throughout 1995 as the economy moderates, inflation remains under control, and interest rates stabilize."

He cautioned that investors may be "temporarily spooked" by various economic reports over the next few months, and also that a slowing economy could pose some risks to the overall market.

But he expects by late this year that bank stock price-to-earnings multiples will have been driven "meaningfully higher" by both the economy's performance and by the entry of new bank stock investors.

But some offer a more skeptical view. Michael A. Plodwick of C.J. Lawrence Inc. is concerned that "soft" will increasingly be viewed as "slow," and that investors "will instead focus on the negative implications this could have for loan growth and credit quality.

"I'm not sure all the implications of this have been completely thought through. We are nearing the end of the (current business) cycle," said the analyst, who cut ratings on seven banks this week.

Mr. Plodwick expressed concern about a possible reversal of investor psychology. He suggested that clients "use the opportunity of current market conditions" to narrow their investment focus to banks likely to be hurt less than others by an economic slowdown.

But there is no disagreement by analysts about one ingredient of the first quarter's bank stock rally. "They had gotten damned cheap," said John J. Mason of Interstate Johnson Lane, Atlanta.

Shawmut National Corp., Hartford, Conn., which is being bought by Fleet Financial Corp., was the leader among banks with market capitalization of at least $85 million, up by 62.4% on a total return basis from January through March. Total return covers both the price gain in the market and the dividend.

A pair of other targets, Putnam Trust Co., Greenwich Conn., up 57.7%, and Michigan National Corp., up 39.5%, took second and third place, respectively. Michigan National shares registered the largest year-to-year gain through March 31, up 68%.

Putnam Trust is being acquired by Bank of New York Co. and Michigan National by National Australia Bank, Melbourne.

In the turnaround category, Imperial Bancorp, Inglewood, Calif., was up 39.3%, and Union Bancorp, San Francisco, was up 30.2%.

Midlantic Corp., Edison, N.J., regarded as both a turnaround story and as a future acquisition target, was up 30%.

In a somewhat different mold, Mellon Bank Corp., Pittsburgh, whose stock has been hurt by concerns about acquisitions it has made, improved by an impressive 34.5%.

The steepest decline over the quarter occurred in the shares of Signet Banking Corp., Richmond, Va., in conjunction with the spinoff of its credit card activities into a separate subsidiary, Capital One Financial Corp. Its shares fell 28%.

Shares of Bankers Trust New York Corp., whose revelation of a sizable first quarter loss surprised Wall Street, was the biggest year-to-year decliner, down 26.4% through March 31. It fell 5.6% during the quarter.

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