Some big banks that participated in megamergers may come to see virtues other than pure size in their bulked-up mortgage portfolios.

Those that figure out how to sell other products to mortgage borrowers could realize impressive revenue gains, experts say.

Most banks with sizable mortgage divisions have set cross-selling priorities; many have been successful at least with second mortgages. But few have effectively sold insurance, mutual funds, or auto loans, and that is where the real profits could lie.

Chase Home Finance's cross-selling efforts "have generated high double- digit (revenue) growth every year since 1995," said Thomas Jacob, head of the mortgage unit of Chase Manhattan Corp. That revenue contributes more than 1% of the bank's total return on equity.

Mortgage originations are projected to top $1.4 trillion this year, according to the Mortgage Bankers Association of America. But this activity and the heavy refinancing volume spurring it are expected to slow next year.

But mega-lenders need not worry. Productivity gains, realized through technology, can keep profitability attractive enough to "keep the big players interested," according to a recent Warburg, Dillon, Read report.

Effective use of expensive technology tends to help the biggest operators by raising barriers to entry by smaller competitors, Warburg Dillon said.

Commercial real estate is also providing fee-growth opportunities, said Douglas D. Danforth Jr., executive vice president of PNC Bank in Pittsburgh.

These include syndicating large bank loans, originating loans for securitization conduits, and servicing.

Commercial real estate will contribute 10% of PNC Bank's net income this year, Mr. Danforth said. "It's a core area for banks, because a large part of the business is still highly localized."

Despite the rise of real estate investment trusts, a large part of the real estate development business is still privately held, he said.

"The net interest margin and returns on capital should be greater in real estate than in many other areas," the PNC executive said.

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