Taking a shot at nonbank competition, banks are aggressively raising the annual percentage yields on money market deposit accounts.

As a result, assets in the banks' alternatives to money market mutual funds rose 21% over the past year, to $705.7 billion. Short-term certificates of deposit were up 12% in that time; passbook savings, only 7%, according to data compiled by the Federal Reserve.

The bidding for market share is particularly keen among companies like First Union Corp. and SunTrust Banks Inc. in the Southeast, where analysts say loan demand is fueling the need for deposits.

"If you are going to drag money away from stocks and annuities, this is the way you're going to have to do it," said Henry J. Coffey Jr., an analyst at J.C. Bradford & Co., Nashville.

The latest entry is SunTrust's Advantage Rate account, a "loss leader" that promises a market-beating yield of 6.5% on balances of $10,000 or more at least until April 12.

This comes on the heels of Richmond, Va.-based Signet Banking Corp.'s money market account yielding 5.90% on a $2,500 minimum balance.

Analysts said both accounts mimic Charlotte, N.C.-based First Union's Cap Account, which offers an average 5% yield on a minimum balance of $15,000.

The Cap Account, like package deals from banks in the Northeast affiliated with Citicorp, Fleet Financial Group, Bank of Boston Corp., and BayBanks Inc., allows customers to pool cash, stocks, bonds, and mutual funds to meet the balance requirement.

First Union's Cap Accounts have grown from $498 million in 1990 to $11 billion currently, said spokesman Mark Folk.

Atlanta-based SunTrust's Advantage Rate account, available in Georgia, Florida, Tennessee, and Alabama, is explicitly designed to attract "people who were putting their money in money market funds at securities firms," said chief financial officer John W. Spiegel in a telephone interview.

"It's their attempt to compete with the nonbanks that have taken deposits away from banks over the last decade and a half," agreed Lehman Brothers analyst Michael L. Mayo.

The SunTrust product resembles accounts from major brokerage firms like Merrill Lynch and Dean Witter. Their rates have traditionally been higher than banks', and they come with banklike services such as check-writing privileges.

SunTrust's 6.5% "teaser" rate far exceeds the national money market account average of 2.79%, as tracked by Bank Rate Monitor.

"Until about 45 days ago, we were regularly seeing highs above 6%, (but) in the last 30 to 60 days, money market account yields have fallen below 6%," said Martin G. Bradshaw, chief executive of Bradshaw Financial Network, a newsletter publisher.

Bank Rate Monitor publisher Robert Heady said banks are moving to boost their core deposit share in a period of declining interest rates. "It's an enticement to bring the customer in the door," he said. "The rate is a carrot, and it doesn't hang around very long."

But Mr. Spiegel indicated SunTrust is unlikely to cut its rate dramatically after April 12.

"The intent is to build an account that is competitive, not just one day but competitive over time," he said. "I'm not saying it's going to stay at 6.5% ... But it is likely to be a fairly competitive rate."

Mr. Spiegel declined to reveal how much new money has come in since the account was unveiled in late January.

The $46.5 billion-asset SunTrust is not pinched for deposits, which grew 3% last year, to $33.1 billion. But Mr. Spiegel linked the strategy "indirectly" to an ambitious three-year plan to boost revenues and increase consumer, commercial, and residential mortgage loans.

Analyst Richard X. Bove at Raymond James & Associates in St. Petersburg, Fla., has speculated that SunTrust is also interested in taking market share away from NationsBank Corp., which faces a delicate conversion period this spring in Atlanta as it tries to retain customers from its recent acquisition of Bank South Corp.

"That is not consequential in our thinking," Mr. Spiegel said. "We're glad to have everybody as a customer. But the real purpose is to reach out into the broad markets for deposit-type monies that are leaving the banking industry."

SunTrust does have a tradition of fighting hard to preserve market share. Last March, confronted with an aggressive certificate of deposit campaign by Wachovia Corp., SunTrust topped Wachovia's 7% rate on one-year CDs.

Scott Hensley contributed to this article.

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