Shares of Wilmington Trust Co. of Wilmington, Del., have rallied in recent weeks after analyst Diane Yates of A.G. Edwards added the company to her coverage with a "buy" rating.

She gave the regional bank her top rating on July 21 and said she was impressed by its attempt to revamp its delivery channels. Closing branches, investing in modern automated teller machines and Internet banking, and investment management initiatives will increase the bank's revenue, she said. Though the stock is up more than 10% since Ms. Yates' report was issued July 27, it is still below its 12-month high of $55.125, which it reached Jan. 14.

The stock fell to a low of $42.562 on July 24 after the company reported second-quarter earnings. On Monday it closed up 50 cents, or 1.03% to $48.8125, well below Ms. Yates' target price of $55.

Brock Vandervliet of Lehman Brothers took a more pessimistic view. Wilmington Trust is a bank "everybody would love to love" but it has some credit-related problems, he said.

Two large nonperforming credits - a $17 million first-quarter real estate-related credit and a $9 million second-quarter commercial loan - pushed the bank's nonperforming asset rate up to 1% and put pressure on earnings, Mr. Vandervliet said.

The bank's management is also trying too many business lines instead of concentrating on wealth management, where its strengths lie, he said. A price around $42 would be more in line with other banks, but at the current price/earnings multiple of 11.6%, the stock is getting pricey, he said.

Banking stocks fell, then rose Monday as investors reacted to mixed economic data. The American Banker index of 225 banks ended the day up 1.38%, and the index of top 50 banks was up 1.14%.

Recent economic numbers are sending mixed signals as to whether the Federal Reserve Open Markets Committee will take further action on interest rates at its meeting next week. Strong growth in the gross domestic product and a stable labor market suggest further action may be needed to stave off inflation, but slightly cooler consumer spending could signal that no further action is needed.

Ms. Yates said she is more confident now than two weeks ago that the economy is actually slowing down enough to satisfy the Fed. "How much slowdown is too much?" she asked "That is what everybody is concerned about now, and that is why the market is so indecisive. Any excuse moves the stocks these days."

But the Fed is only one factor in what is making shares volatile. Investors may be impressed with strong earnings, but have nagging concerns about asset quality and revenue growth.

"We continue to believe that the real test of time will come towards the end of the year, when we are comparing our current estimates to expectations for next year," Ms. Yates wrote in a report made available Monday. Because of slower earnings, she expects cooler market activity during the fall.

The major challenge for diversified financial services remains the retail side, she said. "Slowing revenue growth, combined with the potential for higher chargeoffs, keep our ratings for the group somewhat guarded."

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