Tapping what it says will be a new source of fee income, Fifth Third Bank has announced a program to help companies rid themselves of shareholders who hold small amounts of stock.

The first company in the program is Armco Inc., the Pittsburgh-based steel company, which has 16,000 so-called odd-lot shareholders, investors who hold fewer than 100 shares of the company's stock.

Dana Hushak, assistant vice president of corporate trust, said Armco was already a stock transfer customer of Fifth Third's trust and investment services group, which manages $8.2 billion in assets.

He said when Armco was looking for ways to reduce expenses, Fifth Third officials got the idea to start the program. The $17 billion-asset Cincinnati bank appealed to the company by citing the cost of servicing small investors.

"Less than one-half of 1% of the outstanding shares are held by 16,000 people," Mr. Hushak said. "We said, 'Here's a way we could save money for you.'"

Specifically, Fifth Third will charge shareholders $10 plus 32 cents per share to sell the odd-lots on the open market. The bank will also charge the per-share market price to round odd-lot holdings up to a minimum of 100 shares.

The bank argues that shareholders would have to pay substantially higher fees to sell their holdings through a conventional stock broker.

Mr. Hushak believes his bank can reduce the number of Armco's odd-lot investors by half in the next three to four years.

What's unusual about Fifth Third's program, Mr. Hushak said, is that while many companies conduct one-time odd-lot sales, the Securities and Exchange Commission has given the bank the go-ahead to continually market odd-lot sales for other companies.

Fifth Third said it expects to attract five or six companies a year. Mr. Hushak said he hopes to sign another company to the program by the first quarter of 1996.

The Armco stock transaction could net Fifth Third between $50,000 and $70,000 in fee income, Mr. Hushak predicted. While that's not substantial, he believes the bank can make more money once other companies join the program.

While the program appears to have promise, it did not seem to impress bank analysts. "On the surface, it doesn't appear to be that meaningful," said analyst Fred A. Cummings of McDonald & Co.

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