Many large banks are seeing more companies move their excess balances into short-term investment accounts, according to Treasury Strategies, a Chicago cash management consulting firm.
Daily volume averaged about $56 billion in these commercial sweep accounts last October, 42% more than a year earlier and 83% more than in the same month of 1992, the Chicago firm said.
Treasury Strategies estimated that sweep account revenue at 248 of the country's largest banks doubled in 1994, to $467 million.
Its survey, done in November using data from October and released last week, showed that sweep accounts have become an increasingly attractive alternative for companies to manage their cash.
"It's a real convenience for companies who would otherwise have to find investments for their idle cash themselves," said Anthony J. Carfang, a partner in Treasury Strategies.
The study found that 7% of banks with $10 billion of assets or more offered the use of sweeps into depository accounts and 10% of banks with $5 billion to $10 billion of assets did so.
Banks offering sweep accounts usually link a commercial deposit account with an investment account into which a company's excess cash balances are skimmed daily and invested, typically in money market mutual funds or repurchase agreements.
Money market funds held $12.8 billion of sweep account assets last October, up from $2.9 billion in October 1991. Though most sweep monies are still invested in higher-yielding repurchase agreements, money funds are the fastest-growing investment vehicle for these accounts, the study said.
Mr. Carfang explained that as interest rates begin to fall a typical "money market fund will give a customer a better rate."
With more banks managing their own money market mutual funds, sweep accounts are seen as a way to boost assets under management and gain fee income, Mr. Carfang said.
The study found that sweep accounts using banks' proprietary money funds averaged a balance of $984,000, 55% larger than accounts at the same banks that used other companies' funds.
Banks also boosted their estimated earnings from sweep accounts last year, from 60 basis points to 83 basis points.