Eliminating fees for banking services is like giving out chocolate bars at a children's birthday party: few things can make you more popular.

So when Citibank announced last May that it was removing monthly and transaction-based fees for electronic banking services the reaction from customers was sweet.

Enrollment in electronic banking, primarily PC-based home banking among younger customers, increased over 200% in six months, said Maria Mendler, a bank spokeswoman.

"We don't normally give out customer numbers, but between June 1 and Dec. 1, we increased (electronic banking) customers by about 125,000," Ms. Mendler said.

In January, the Citicorp subsidiary served up more candy: it eliminated several so-called "nuisance fees," like the $15 it had charged for stop- payment orders, the $10 for checks with insufficient funds, and the $2 for check overdraft protection.

"Definitely, this is a growth strategy," Ms. Mendler said. "People are saying we're gaining market share, and we are hoping customers will bring more of their relationship to us."

But at a time when banks rely heavily on fee income and when many banks have made costly investments in automated teller machine networks, only a handful of competitors have followed Citibank's bold lead.

Chase Manhattan Corp. rolled out a new electronic banking service called ChaseDirect in June, waiving fees for customers who maintained $6,000 in Chase accounts. The move was viewed by industry analysts as a direct parry to Citibank.

Other banks have also stepped cautiously into the ring. Just last month, NationsBank Corp. and BayBanks Inc. announced free home banking programs for certain customers.

And KeyCorp has taken the incentives race one step further, actually paying customers 25 cents each time they use an automated teller machine to deposit a check, with a $1 monthly maximum. A spokesman, Russell Griffin, said the bank plans this month to announce further rewards, of up to $10, for other banking transactions.

"Citibank has historically been viewed as the pricing leader, and historically this pricing leadership has been in terms of increases," said Les Dinkin, a Westport, Conn.-based electronic banking consultant.

The recent fee decreases, Mr. Dinkin said, represented an attempt to "reposition their pricing leadership" and "increase the values that consumers get for banking with them."

As other bankers weigh the rewards of offering carrots rather than sticks, Citibank's experience is one of several on their minds. Also noteworthy was the public relations disaster that ensued last year when First Chicago Corp. announced a $3 fee for certain teller transactions, then abruptly withdrew the plan.

First Chicago was twitted not only by Jay Leno and the like, but also by such local rivals as Bridgeview Bank and Trust Co., a community bank whose president began paying $3 to customers who came in to meet him.

Alan Bergstrom, an Atlanta-based banking consultant with Dove Associates praised Citibank's approach and recommended that other banks cling less dearly to the income they derive from fees.

"In survey after survey, what consumers say is, 'I'm being nickel-and- dimed,'" Mr. Bergstrom said.

"Banks have to realize that where they've earned profits in the past may not necessarily be where they earn profits in the future," he added.

While Citibank officials say that they have more than replaced the lost fee revenues, other banks have been hesitant to imitate them.

"It takes a brave manager to give up revenues on the theory that you will ultimately make more money," said Diane Glossman, an analyst with Salomon Brothers Inc. who follows Citibank. She said she did not know of any other bank that had slashed fees so comprehensively.

Several analysts said they viewed Citibank's maneuvers as a calculated grab for market share at a time when their chief New York rivals, Chase Manhattan and Chemical Banking Corp. are merging.

But Susan Weeks, a Citibank spokeswoman, said the fee waivers were part of a "longer-term strategy that we've been looking at."

The strategy was masterminded by Willy Socquet, a New York-based business manager who formerly ran Citicorp's retail offices in Germany.

Ms. Weeks said that customers at focus groups objected loudly to nuisance fees, and that Mr. Socquet sympathized. "We don't have these fees in Germany," she said.

But despite heavy local advertising of Citibank's free services and intimations by the bank of the program's success, competing banks say they have yet to see any customer exodus.

"There is nothing in our numbers that shows that there's anything unusual going on in the marketplace," said Russel Herz, senior vice president of product management for Chemical Bank.

Mr. Herz, who has been tapped to handle deposit and fee services for Chase when the two banks formally merge at the end of this month, hinted that any retaliatory efforts would come after the dust from the merger has settled. "I think there's going to be some really good news for customers later this year coming out of the new Chase," he said.

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