The effects of consolidation have taken hold in the cash management business, with the 20 largest U.S. banks commanding two-thirds of the revenue, an Ernst & Young study said.

The accounting and consulting firm's 13th annual cash management survey showed that wholesale bankers expect $7.75 billion of noncredit revenues this year. Nearly $5.2 billion would go to the top 20 banks.

Those big banks expect to see their revenues rise 5.5% this year, about equal to the industry's overall growth rate.

Midsize banks, with assets of $4.5 billion to $40 billion, are expecting 6% revenue growth, to $2.2 billion.

By contrast, banks with less than $4.5 billion of assets expect only 3.5% growth this year. Revenues for this group are expected to total less than $350 million.

Lawrence Forman, cash management analyst and director of the Ernst & Young survey, said the largest players are threatening to grow bigger by aggressively pursuing the small and midsize companies that smaller banks are trying desperately to retain.

"It is really putting pressure on smaller banks," Mr. Forman said.

Large banks are increasingly tailoring products and services to smaller companies, he said, relying on additional transaction volumes to help spread overhead costs.

John Rodelli, executive vice president of BankAmerica Corp., said it has typically concentrated on serving larger businesses but has recently renewed efforts in the middle-market arena, which he said may be just as profitable.

The broad industry consensus is that a few banks will emerge as dominant providers, Mr. Rodelli said.

"The message we push to customers, which I think probably the top five or six banks do as well, is that it's very important in choosing who they do business with," the BankAmerica executive said.

Ernst & Young sent its survey questionnaire to the 300 largest banks. It got 70 responses, including 19 of the top 20.

The industry's anticipated revenue growth this year would be ahead of last year's 5% and the 4% of 1994. The 1994 figure had dropped from 7% in 1993 for reasons that may have included "unreasonable pricing strategies," Mr. Forman said.

Susan Rugnetta, managing director of global payments at Bank of Boston Corp., said many banks might have acted out of fear of losing corporate relationships.

"It's definitely a buyer's market" for corporate services, she said.

"You have to price to market, and you'd better find ways within your shop to create efficiencies and keep your costs down" so that "overall margins are not threatened," Ms. Rugnetta added. "It's tough."

In other survey findings, revenues by product yielded no surprises, although information reporting services grew at an "impressive" 8.5%, Mr. Forman said.

He attributed the increase to the popularity of desktop PC banking systems among small and midsize companies.

Automated clearing house services grew at a 10.5% clip, leading all other products in terms of growth. But demand deposit services remained the largest contributor of revenue, at 38%. Wire transfers and check clearing each accounted for 16%.

The survey also found that sweep accounts have quickly matured as a cash management service; 65 of the 70 responding banks offer them.

The average amount invested in sweep accounts grew 23%, to an estimated $62 billion daily for all banks in the survey. The banks were increasingly funneling corporate money into proprietary rather than third-party mutual funds.

The proportion of banks exclusively offering third-party funds with sweep services has declined to 14%, from 43% in 1993.

Banks are "trying to steer their customers into their own families of mutual funds," Mr. Forman said. "They don't want to give this money away."

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