You just can't keep a good product down.

Certificates of deposit, long a mainstay of consumer banking, fell out of favor in the early 1990s as interest rates tumbled. Small savers who had traditionally squirreled away money in insured deposits began chasing after higher-yielding but riskier investments, notably mutual funds.

But now -- with rates rising and banks increasingly eager for funds to lend -- CDs are staging a dramatic comeback.

The signs are everywhere:

* BankAmerica Corp., San Francisco, is dangling free checking accounts and above-market interest rates in a CD campaign that has already brought in $1 billion.

* United Missouri Bancshares, Kansas City, Mo., is pulling in customers for nine-and 18-month deposits by flying banners outside its branches that boast that CDs are back.

* New York-based Chase Manhattan Corp. has just concluded a three-month advertising campaign promoting deposits as a smart way for investors to diversify.

* Detroit's Comerica Inc. is touting 18-, 30-, and 42-month CDs that feature some of the highest rates available on those terms.

Such marketing efforts appear to be paying off. After 39 consecutive months of outflows, commercial banks began reporting steady gains in small time deposit balances in May. At the end of November, banks held $805.9 billion in CDs of $100,000 or less, up nearly 5% from a multiyear low, reached in April, of $768.6 billion.

Large time deposits, known as jumbo CDs, are gaining, too. They held $359.4 billion in November, the highest level in nearly two years.

And small wonder. Rates on bank CDs have become considerably more appetizing in just the past year. Rates on one-year CDs, which hovered around 3% last December, are now closing in on 7%.

"These products are more attractive to consumers than they have been in a long time," said Mitchell Ratliff, group marketing manager for deposits and investments at Chase Manhattan.

One reason deposits are back in vogue is that banks finally need the money.

After several years of negative to weak growth, loan volume surged 21.2% in the third quarter of 1994, according to the Federal Reserve. It was the biggest quarterly gain since the first quarter of 1991.

Though banks could meet loan demand through other borrowings, such as Federal Home Loan Bank advances, "deposits are always going to be the cheapest form of funding for banks," said Ann Figueredo, a consultant with the Spectrem Group, San Francisco.

Some banks that have experienced strong loan growth make no bones about their desire to gather deposits matched to their funding needs.

"If we have a need for one-year funds, we will price the one-year CD attractively to help meet that demand," said a spokeswoman for NBD Bancorp, Detroit.

Others, however, insist that loan demand isn't at the top of their minds. Chase Manhattan's Mr. Ratliff said his company's primary purpose in promoting CDs "is to meet customers' needs, not just meet the needs of our balance sheet."

Whatever the explanation, banks are clearly boosting their efforts to attract depositors.

In the trend-setting New York market alone, spending on CD advertising soared to $7.5 million in the first 11 months of 1994, according to Competitrak, a New York firm that monitors print and television advertising.

That is a 64% rise from the comparable period of 1993, according to Robert Moss, Competitrak's president. And the increase is all the more dramatic, given that total bank advertising outlays in New York are down 8%.

A big chunk of 1994's spending -- $1.3 million -- has gone into ads that focus specifically on CD rates. And half of that, Mr. Moss noted, was spent in November alone.

What's more, it is not just the biggest banks that are advertising to attract deposits. "Thrifts are really leading the charge," Mr. Moss said.

The rebirth of CDs does have a downside for banks, however. Bank investment product sales are likely to feel the pinch, particularly as novice mutual fund investors see CD rates marching toward double digits.

Given the opportunity and reasonable yields, "people will probably return to CDs in droves," said Les Dinkin, managing principal of NBW Consulting Group, Westport, Conn.

Though most banks will stand by their investment products programs, those that were "feeling squeamish to begin with may withdraw support," said Ms. Figueredo of Spectrem Group.

At First Chicago Corp.'s brokerage unit, top executives are tailoring their sales strategies to the market cycle.

"We're definitely seeing a pickup in our CD volume," acknowledged Richard A. Davies, president of First Chicago Investment Services.

"Mutual funds are still great for the long term," he added. "They're just not going to be our focus for the next three or four months."

Instead, starting in January, the brokerage plans to focus its marketing efforts on cash instruments, such as money market mutual funds, and other short-term investments, Mr. Davies said.

Executives at other large banks echo Mr. Davies' views, expressing confidence that investment products are here to stay despite the renewed popularity of CDs.

The deposit business is up at Banc One Corp, too. But the Columbus, Ohio, banking company's proprietary mutual funds are flourishing despite rocky market conditions, said Eric M. Rubin, a managing director of Banc One Investment Advisors Corp.

As CD rates rise, "we have a challenge, but I don't think it really hurts us," Mr. Rubin said.


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