Banks raked in $8.1 billion of noncredit revenue from their cash management services last year, 6% more than in 1995 and exceeding expectations by $350 million, an Ernst & Young LLC study said.

The accounting and consulting firm's 14th annual cash management survey projects $8.6 billion in such revenue this year, a 6.5% increase.

Lawrence Forman, cash management analyst and director of the Ernst & Young survey, said there are many promising signs for the highly mature business, but he attributed most of its well-being to general economic growth.

"The main component of this growth has been increased volume, and that relates to the economy," Mr. Forman said. "When the economy is doing better, there are more payments, more collections, and more activity."

The survey, conducted in the first half, went out to 300 of the largest U.S. banks and 76 responded.

Larger banks again increased their market share at the expense of smaller ones, the survey found. The top 20 wholesale banks garnered 72% of noncredit cash management revenue last year, up from 69% in 1995. And the top five accounted for 34%, averaging $550 million each-up from 31% in 1995.

Although Ernst & Young's study did not rank individual performances, NationsBank is expecting 1997 to be its best year ever in cash management, said Nick Alex, senior vice president of the Charlotte, N.C.-based company.

NationsBank's wholesale business is running at about $900 million of revenue a year, Mr. Alex said.

"We may have a broader definition than Ernst & Young, but the way I count the beans it's a very big business," he said.

Mr. Forman of Ernst & Young said consolidation is having an increasingly strong effect on the industry and its customers, as banks expand across state lines and corporations reduce the number of banks they use.

He also said corporations want to choose banks that are likely to survive the current wave of banking consolidations.

The Ernst & Young study found that automated clearing house and electronic data interchange were the fastest-growing revenue category in cash management last year, up 14% from 1995, though they brought in only a modest $202 million.

Growth in demand deposit account services, which includes check disbursements, account maintenance, sweep accounts, and zero-balance accounts, slowed to 4.5% from 5.5%. But these remained "the meat and potatoes" of wholesale banking, generating 40% of all noncredit cash management revenue, Mr. Alex.

Revenue from wholesale lockbox, a bank collection service by which corporate trading partners settle hundreds of invoices with a single check, jumped 11% in 1996, to $648 million, after a 7% rise the year before.

Looking to the future, the Internet looms large.

Only a handful of banks offered wholesale services over the World Wide Web last year, but more than 80% said they were investigating the Internet for opportunities such as information reporting, transaction initiation, and check image transmission.

Twenty-five percent said they would offer such services within 12 months.

In the last few years banks have done little innovating in cash management, Mr. Alex said. "The industry is finally getting to a place where true innovation is starting to come to the surface."

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