When Wachovia Corp. introduced a small-business sweep account, the bank didn't broadcast the news to its customers. Instead, bankers waited for customers to ask about it.

"We sell it defensively," said Judy Buchanan, Wachovia vice president for business banking support.

The sweep accounts have helped Wachovia retain profitable business customers that might have defected to Merrill Lynch & Co., Ms. Buchanan said.

But the banking company still doesn't want to promote the popular accounts because they are not as profitable as traditional small-business checking.

Wachovia's sentiment was echoed by many other bankers at a recent Bank Administration Institute small-business conference in Chicago who either offer or plan to offer sweep accounts but will not advertise them.

"We've chosen not to take an aggressive marketing approach, said Brian J. Connolly, senior vice president of Fleet Financial Group Inc. "We see it as a defensive product."

Sweep accounts automatically transfer balances above a certain level from checking accounts into money market instruments or mutual funds at the end of each day.

By law, banks are not allowed to pay interest on small-business checking accounts. They can pay interest on deposits in money market funds, however.

Bankers say the insured sweep accounts allow them to compete more effectively with nonbanks that can offer higher returns on business deposit accounts.

"We were finding a lot of customers going to Merrill Lynch or to community banks they could form relationships with," Mr. Connolly said.

Total assets invested in bank sweep accounts nationwide rose 55%, to $113 billion, from October 1995 to October 1996, according to a study by Chicago-based Treasury Strategies Inc.

What's more, the study found, firms with less than $1 billion of revenue invest 14% of their funds in bank sweep accounts, compared with only 3% for larger companies.

More than 470 of the 510 largest banks in the country offer corporate sweep accounts, and many have created similar products for small businesses, the study said.

Ms. Buchanan said Wachovia increased assets in sweep accounts by 88% from 1995 to 1996 while maintaining moderate growth in noninterest-bearing checking accounts.

"The competitive marketplace that we all live in is demanding this," Ms. Buchanan said. "It's a slam dunk for enhancing relationship value."

Wachovia offers lower rates on small-business accounts than on corporate sweep accounts and charges monthly fees to make the accounts generate more revenue.

The bank reduces its cost of providing the account for customers with about $20,000 of investable funds by relying only on proprietary money market or mutual funds.

Other bankers said they haven't figured out how to quantify their profits from retaining customers who might otherwise switch to a Merrill Lynch.

"A lot of people don't understand that it is better to keep part of the relationship than lose it completely," said Nancy Carroll, a supervisor at Wilmette, Ill.-based North Shore Community Bank and Trust, which does not offer sweep accounts.

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