First Union Corp. has set lofty goals for the profitability of its mutual fund family and other fee-generating businesses.

Donald A. McMullen Jr., head of First Union's asset management group, told bank analysts at a conference last week that his unit earned $117.5 million in 1995, 5% of the holding company's pretax profit.

But he predicted that the unit would earn $285 million this year and added that its profits are expected to jump to $1.5 billion by the year 2000.

Though observers say the bulk of the unit's earnings came from traditional trust and private banking fees, relatively new lines of business such as brokerage and mutual funds are gaining in importance.

"Without question, the two fastest areas of growth for them are the Evergreen Funds and their mutual fund wrap accounts," said Moshe A. Orenbuch, a bank analyst for New York-based Sanford C. Bernstein & Co.

Indeed, First Union chief executive Edward E. Crutchfield has pledged that his bank, which currently manages $13.2 billion of mutual fund assets, will have gathered $100 billion of fund assets by the end of the century.

Still, observers pointed out that the asset management business contributes less to First Union's bottom line than the same business does at some of the bank's regional competitors.

Timothy Rayl, an equity analyst for Dominick & Dominick, New York, said that NationsBank Corp. and SunTrust Banks Inc. pull in more fee revenue because of their much larger and better established trust departments.

Merrill H. Ross, a bank analyst at Wheat First Butcher Singer, Richmond, Va., said First Union's investment businesses generate "about half of what" those businesses contribute to NationsBank's revenue but are "twice as large as Wachovia Corp.'s."

First Union, like many other banking companies, does not break out the profitability of mutual funds or brokerage.

Mr. McMullen said First Union more than doubled sales volume of its Evergreen Funds, to $701.6 million last year, from $301.4 million in 1994. And assets in the company's mutual fund wrap accounts have grown nearly fourfold since 1993, to $11.7 billion last year, he said.

Avi Nachmany, a partner in the New York-based consulting firm Strategic Insight said, "If you look at the money that they are capturing in their retail funds, clearly First Union is the most successful of all banks" in the fund business.

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