As banks roll out mutual funds this year, the focus is on giving customers more payment, rather than investment, options.

Of the 79 funds that banks launched in the first six months of 1998, 55 were simply new share classes-versions of existing funds but featuring a different formula for calculating sales fees, according to preliminary data from Lipper Analytical Services, Summit, N.J.

The remaining 24 funds were truly new offerings, as banks filled in gaps in their product lines.

Fund launchings are down sharply from the first half of 1997, when banks added 157, including 80 new share classes. Both trends-the decline in the number of launchings and the tilt toward adding share classes rather than investment options-are in line with developments in the fund industry as a whole, according to Lipper's data.

Among the most active banks so far this year were First Union Corp., PNC Bank Corp., and Deutsche Bank.

First Union exemplified the trend toward more payment options. The Charlotte, N.C., banking company added 16 portfolios to its Evergreen Funds family in the first half, only one of which was brand new. The rest were versions of existing funds recast with front-end loads (A shares), level loads (C shares), or institutional investor fee structures (Y shares). (See glossary below.)

First Union, which has beefed up its mutual fund business in recent years by buying two big nonbank fund families and through a string of bank acquisitions, has little need to add new kinds of portfolios. Its 76 funds run the gamut from staples, such as a blue chip fund, to specialties, such as a precious metals fund.

But through the acquisitions, it had assembled a mishmash of fee schedules that it is now revamping into a uniform pricing matrix consisting of A, B, C, and Y share classes.

The Evergreen Funds are overhauling their pricing for the simple reason that different customers have different needs, a spokesman said. "Whatever pricing structure they feel most comfortable with, the choice is up to them," he said.

Other banking companies that had large fund rollouts in the first half were Pittsburgh's PNC and Deutsche Bank.

PNC introduced four BlackRock funds, each with five share classes. (For each fund, Lipper classifies one share class as the new fund and four as additional share classes.) The BlackRock Microcap, Delaware Tax-free, and Kentucky Tax-free funds were started from scratch; the Ginnie Mae Fund was formed from common trust fund assets.

Deutsche Fund Management, the U.S. mutual fund arm of Deutsche Bank, Frankfurt, rolled out six B-share classes of funds that previously were sold only as A shares.

Its B shares, sold through 50 broker-dealers including Charles Schwab & Co. and Merrill Lynch & Co., now account for 50% of Deutsche Fund's volume, according to Peter T. Moeller, director of sales.

Plans call for the funds to be available through C shares on Sept. 1, Mr. Moeller added. "It's client-driven to move to C shares, given the trends in broker-dealers and financial planners. Brokers are going toward fee-based management as opposed to transactional management," he said.

Multiple share classes have varying appeals, he said.

"Many brokers have been doing business for years with clients who are comfortable with A shares," Mr. Moeller said, adding that up-front commissions on long-term investments "are really a good alternative."

Other banks created mutual funds in order to simplify pricing and costs within an existing distribution channel.

For instance, before a conversion of common trust and commingled funds in March, Mercantile Bankshares, Baltimore, managed 25 portfolios. The streamlining produced 14 mutual funds managing about $2.8 billion of assets.

Mercantile, which caters to institutions and affluent investors, has one institutional share class for its mutual funds. Personal trust clients are reimbursed the fee.

"We're not doing this to create a retail class or even for wholesale distribution," said Malcolm "Skip" Wilson, executive vice president of Mercantile. "This really was to create a better product for current clients."

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