Sharpening its focus on mutual fund sales through banks, Fidelity Investments has split its bank services division in two.

One of the units caters to bank broker-dealers and the other specializes in trust departments, according to Paul Hondros, president of Fidelity Institutional Services Co.

The arrangement is part of a concerted effort to boost by more than 60% the assets amassed through banks and other financial intermediaries, such as financial planners, brokers, and insurance agents, Mr. Hondros said.

Aiming for $100 Billion

Right now, those assets stand at $60 billion, and represent a fifth of Fidelity's book of business. Over the next two years, Mr. Hondros wants to hike the total to $100 billion.

By breaking the bank division into two units, Fidelity intends to provide better service to each market and to offer products tailored to their distinct needs, Mr. Hondros said.

Nishan G. Vartabedian, who previously headed the entire bank services division, will now focus on the trust side. David Liebrock, who formerly reported to Mr. Vartabedian, is taking over the bank brokerage side.

Seen as Growth Businesses

"They're both fundamentally growth businesses for us," Mr. Hondros said.

Though Fidelity is the nation's largest mutual fund company, it only recently began emphasizing sales through banks. Its strong name recognition and diverse line of top-performing funds are considered big advantages in the marketplace.

One industry observer said Fidelity's decision to split the banking division makes good sense. "It's really a much different sell to each of those market segments," said Glen Casey, a consultant with Cerulli Associates, Boston.

"On the broker-dealer side, you're dealing with bank representatives who lack savvy and need hand-holding," Mr. Casey said. "On the trust side, you're generally talking about experienced trust officers who have been active with high-net-worth customers."

Special Line of Funds

During a wide-ranging interview this week, Mr. Hondros said Fidelity's Advisor Funds, which were specially developed for financial intermediaries, have been "making good strides."

The funds, which had $500 million in assets in 1991, reached nearly $5 billion at the end of 1992 and have since doubled to $10 billion. Within two years, Mr. Hondros hopes to boost the assets to $30 billion.

The Advisor Funds, which have been helped along by outstanding investment performance, have been especially popular with bank brokerages, Mr. Hondros said.

Strong Brand Name

Big banks are looking to Fidelity for funds that flesh out their product lines, while small banks are looking for a wide range of products. Community banks seem especially drawn to the Fidelity brand name, which provides "rub-off credibility," Mr. Hondros said.

One of the most promising avenues for asset growth is the retirement savings market, Mr. Hondros said.

Hot Market

Fidelity already manages about $60 billion in 401(k) plan and other retirement assets, but the market is far from saturated, Mr. Hondros said.

With 401(k) plan assets expected to soar past $1 trillion in coming years, banks have been especially interested in grabbing a piece of the action.

To that end, Fidelity has put together a 401(k) plan package that banks and other financial intermediaries can offer to their customers.

The package gives banks access to 401(k) accounting systems, a family of funds, and communications materials.

Since quietly launching the sales effort a few weeks ago, Fidelity has "put on about $400 million in assets" this way, Mr. Hondros said.

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