CHARLOTTE, N.C. — After a period of restructuring that has included thousands of layoffs and the sale and closure of several business lines, First Union Corp. is looking to its capital management business as the revenue-generating jewel in its restructured organization.

Donald A. McMullen Jr., the First Union vice chairman who heads up the Capital Management Group — which includes asset management and brokerage units — said it could eventually contribute a hefty 40% of the Charlotte, N.C., banking company’s revenues.

After an acquisition spree in the 1990s, which saw First Union run off a string of deals for both banks and investment companies, the company has been digesting its gains. Deals in the investment arena have enabled the company to offer a broader range of products to consumer and corporate customers — from trusts and other investment management services to brokerage services and insurance.

When Mr. McMullen, 52, was hired in 1995 to build First Union’s investment business, it contributed just 6% of revenues. Last year its share had risen to 27% of the top line, Mr. McMullen said. And as chairman and chief executive G. Kennedy Thompson completes a restructuring and tries to restore investor confidence, the Capital Management Group appears to be gaining importance.

Mr. McMullen, formerly head of American Capital Management Research, was hired by former First Union chairman and chief executive Edward Crutchfield to build the money management business. Mr. Crutchfield had the vision to see the importance of participating in the investment business as a way to evolve beyond traditional banking activities.

First Union now sells services through its broker-dealer network, bank branches, independent financial consultants, and its Web site. “We said we needed to meet clients the way they wanted to be met,” Mr. McMullen said. “It doesn’t matter which of these channels you come into as a human being. All are on the same operating platform.”

Capital Management Group revenues grew from $400 million in 1995 to $3.7 billion in 2000, a growth rate of about 60% a year, including acquisitions.

Since Mr. McMullen took the reins, First Union has bought investment businesses specializing in money management, retail brokerage, trust, and insurance.

These include Boston-based Keystone Investments (now part of the bank’s Evergreen mutual fund family) in 1996; the Richmond, Va., investment bank Wheat First Butcher Singer in 1998 and Chicago’s Everen Capital Corp. in 1999 (both became part of First Union Securities); and the financial advisory firm J.W. Genesis Financial Corp. of Boca Raton, Fla.

First Union Securities is now the nation’s No. 6 broker-dealer in terms of the number of brokers. The parent company’s private capital management unit, which manages investments for the bank’s wealthiest customers, ranks No. 8 based on assets. The company is the second-largest bank annuity provider by sales, behind Citigroup Inc. And it also is carving out a niche in managing corporate 401(k) plans.

“If you look at that 1995 vision, this is exactly where we wanted to get to,” Mr. McMullen said.

But over the years, First Union has gained some competition as other banking companies looked to investment-related businesses to boost their fee income. One of the most recent bank acquisitions of a nonbank was Wells Fargo & Co.’s agreement to buy financial and tax adviser H.D. Vest & Co. of Irving, Tex., for $127.5 million. The deal would expand Wells’ reach with a network of 6,000 independent financial advisers.

The difference may be First Union’s head start. Through a series of well-publicized and sometimes criticized deals in the past six years, the company has developed an enviable distribution network and set of products, analysts say.

“They got off to an early start compared to a number of banks,” said analyst Ronald Mandle of Sanford C. Bernstein & Co. “Ed Crutchfield had a good vision for how the financial services industry was changing.”

First Union probably paid too much for some of the companies that now make up the Capital Management Group, observed Mr. Mandle. And at least in the short term, growth may be disappointing because of the slowing capital markets.

But the group “continues to hum along, trying to gather assets and expand distribution,” Mr. Mandle said. First Union has assembled a team and built the structure. “Now it’s time to play ball,” said Christopher Marinac, an analyst at Robinson Humphrey in Atlanta.

Mr. Marinac said he likes First Union’s chances. Mr. McMullen’s group is positioned to keep growing and to expand its contribution to the bank’s revenues and profits, he said. “In my opinion, this is the most valuable piece of First Union,” he added. “This has the most sticky revenues, and … frankly can give them the best growth.”

But in going toe-to-toe with big brokerages like Merrill Lynch, Charles Schwab, and Morgan Stanley Dean Witter & Co., First Union is also forced into the bigger advertising spending typical of these firms, said Mr. Mandle. “I think they just need to get their message out more,” he said.

Mr. Marinac disagreed. Though the First Union brand may not carry quite the same cachet as Merrill Lynch and others, he said, the banking company’s national advertising campaigns in recent years have boosted consumer awareness.

“As long as they continue to win their share of the business, they can co-exist with Merrill and Schwab and Morgan Stanley,” Mr. Marinac said.

And in these volatile markets, First Union may have a winning hand, he said. “Frankly, I think that plays into their hands. What happens when you have a volatile market two quarters in row? You have customers who want and desire greater advice. First Union is in a prime position to capture more business.”

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